Housing Prices Rising, Investors Moving On

By E-Renter Tenant Screening
Posted on January 21, 2013 under Housing Trends | Be the First to Comment

Some of the housing markets hit hard by the housing bubble were Phoenix, Las Vegas, Tampa and several markets in California. As prices fell to rock bottom levels, real estate investors made major purchases in these markets. And now, as prices begin rising, investment groups are looking for the next place to find a bargain.

In Phoenix, the percentage of homes purchased by investors in November 2012 was 28%, down from August’s mark of 36%. Meanwhile, year-over-year home prices in Phoenix were up 24% in November, compared to 7.4% nationwide.

Investors are looking for new markets to buy homes and convert them to rental properties. According to a recent JPMorgan Chase research report, major institutional investors are planning to invest as much as $10 billion in the single-family rental market. Their targets? Three bedroom, two-bath homes in the $100,000 to $125,000 range. They’ll make repairs, rent them out, and bet on the price appreciating in the next several years.

That figure equals about 80,000 homes, out of approximately 12 million single-family rental homes across the nation, which are mostly owned by individual investors.

Some of the bigger players are:

• The Blackstone Group, which has spent $2.5 billion on 16,000 homes. It is purchasing around 2,500 homes each month.
• Colony Capital, which is investing up to $150 million per month this year, after purchasing 5,000 homes last year.
• Waypoint Homes, which expects to own 10,000 homes by the end of the year.

Many groups started in Phoenix, then went into California, Atlanta, Tampa, Orlando, Chicago, Las Vegas and Charlotte. Some are buying at a faster pace, perhaps because home prices are rising faster than expected. If prices rise above a certain point, they won’t bring high enough rents to make a sound investment.

Real estate markets in Atlanta and Tampa are now seeing the impact of investors coming in, with dozens of offers on foreclosed homes, many by cash-paying buyers. Good buys are becoming harder to find. Individual homebuyers are seeing more competition from small and large investors, resulting in bidding wars and reducing inventories of homes for sale.

Nationwide, investors purchased 19% of homes in November, according to the National Association of Realtors, which is down 23% from January and February 2012. Areas where investor sales are leveling off include Tucson; Oakland; Tacoma, Washington; Washington D.C. and Durham, N.C.

This pattern is expected to continue as home prices rise and investors exit out of markets, then return when prices stabilize.