Press Release: November 22, 2011 -

Low Prices, Rental Demand Attract More Investors, HousingPulse Finds>

 

 

 

Low Prices, Rental Demand Attract More Investors, HousingPulse Finds

 WASHINGTON, DC (November 22) – Low home prices and strong demand for rental properties are causing a surge in investor buying, according to the latest Campbell/Inside Mortgage Finance HousingPulse Tracking Survey.

 Investor purchases hit 22.3% of closed transactions for the month of October, up from just 19.6% as recently as July. For the past three months, investor participation has exceeded 20%, continuing a long-term trend of increased investor interest in the housing market.

 A combination of low home prices and growing demand for rental units make purchasing damaged Real Estate Owned (REO), fixing up the properties, and then collecting monthly rents, an attractive financial play. In October, average prices for damaged REO hit $101,100, the lowest price recorded in two years. In contrast, home prices for non-distressed residential properties averaged $266,700 in October.

One factor pushing down average home prices overall is the high proportion of distressed properties found in today’s housing market. The total proportion of distressed home sales, as represented by the HousingPulse Distressed Property Index (DPI), rose a full 4 percentage points to 48.4% in October, up from to 44.4% in September.

Meanwhile, the gap between the supply of distressed properties and their absorption by first-time homebuyers widened to 13.7 percentage points in October, from a reading of 8.8 percentage points in September. This shows that first-time homebuyers have become less active in the distressed property housing market.

Demand for rental units remains strong. Campbell Surveys estimates that 61.6% of investor properties purchased during the month of October will be rented out, with the remainder being flipped.

“Investors are prominent in the city of Las Vegas. They both flip and rent and buy properties in bulk. Renting single family homes is an extremely viable option and seems to be a growing trend in the valley with the decreasing of prices. Our inventory is dropping so we are seeing more investors becoming aggressive with their offers,” reported a real estate agent from Nevada in the latest HousingPulse.

“Given the current conditions in the market here locally, many of the investors are purchasing homes to rent until the market turns around then possibly looking to sell in a few years. Yes, at this point renting homes is a better option than flipping because the gap between what an investor can buy a house, fix it and flip it does not cover the cost of re-selling it,” added an agent from California.

“The rental needs are great, and since no one can GET a mortgage, fix and flips are dying,” observed an agent in Colorado.

The Campbell/Inside Mortgage Finance HousingPulse Tracking Survey involves approximately 2,500 real estate agents nationwide each month and provides up-to-date intelligence on home sales and mortgage usage patterns.

For more information on the survey, contact John Campbell at Campbell Surveys at (202) 363-2069 or jcampbell@housingpulse.com.

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11/22/2011