Investors Recede – Will Buyers Fill the Void?

Trey Garrison  |   November 6, 2014

The share of institutional investors — entities who purchase at least 10 properties in a year — dropped to a four-year low in the third quarter, according to RealtyTrac’s third-quarter 2014 report. 

Making Dollars Work?

Investors Slowing Down on Buying Spree

Field Opens for Buyers

Investors Continue Gradual Pullback

Institutional investors accounted for 4.3 percent of all single-family home and condo sales, down from 5.3 percent a year ago. It is the lowest share of institutional investors since the fourth quarter of 2010. 

Cash sales, however, continue to make up a large share of the market, according to RealtyTrac, which found that nearly 34 percent of all single-family home and condo sales in the third quarter were from cash sales, unchanged from a year ago. But RealtyTrac forecasters say that a drop in cash sales in many markets is looming. 

“Cash sales continue to be an important piece of the real estate puzzle right now ... helping to drive up U.S. median home prices 38 percent over the last two-and-a-half years,” says Daren Blomquist, vice president at RealtyTrac. “As institutional investors and other cash buyers slow down their purchasing in many markets across the country, more traditional buyers — including first-time home buyers and move-up buyers — will need to increasingly fill in the missing puzzle pieces to maintain the momentum of the housing recovery.”

Where Investors Are Active

Institutional investors are still actively purchasing single-family rentals, but are mostly targeting markets where bargains can still be found.

The following metros (with populations of at least 500,000) had the largest share of institutional investor purchases in the third quarter: 

Where Cash Sales Are Still Growing

In some markets, cash sales are also on the rise, most often centered in markets in which recent rebounds in distressed sales are attracting bargain hunters or in which booming job markets are leading to a competitive bidding environment, Blomquist notes. 

In the third quarter, the following metros had the largest share of cash sales: 

Source: Housing Wire