Are real-estate investors starting to run out of gas? Single-family home investors, whose mostly cash purchases played a central role in healing the U.S. housing market, have started to slow down their buying, according to several surveys, land purchases by investors continue to trend upward.
Investors accounted for 20.2% of home purchases in May—still high by historical standards, but down from a peak of 23.1% reached in February, according to the Campbell/Inside Mortgage Finance survey of real estate conditions. A separate survey conducted for MemphisInvest.com and Premier Property Management Group found that investors planned to slow their home purchases in the next year.
Several peripheral indicators as well as some individual market data suggest waning investor interest as well. In May there were fewer offers for distressed homes like foreclosures and short sales, which are favored by investors. Those properties stayed on the market for longer than in the month before and closed further below the asking price, according to the Campbell/Inside Mortgage Finance.
Reports from the National Association of Realtors and Trulia, a real estate listings site, both show a slight decline in foreign buyers — a big source of investors in U.S. single family homes and condominiums.
And, of course, even if investors are slowing their purchases it doesn’t mean they are leaving the housing market. For starters, it’s not unusual for investor share to decline in the spring, when there are more owner-occupants looking for homes. Also, many investors bought into the single-family real estate for the purpose of renting them out—income that continues to flow long after they stop buying property.
Fewer investors wouldn’t necessarily mean the housing recovery is in jeopardy, either. While surveys show investors are slowing down owner-occupy purchases remain healthy. The number of offers for non-distressed single-family homes—which are favored by owner-occupiers—has increased over the past several months, according to Campbell/Inside Mortgage Finance. Non-distressed homes are selling faster and the sales-to list-ratio, a proxy for buyer competition, is rising.
Still, anyone who got into the real estate market at the bottom couldn’t be blamed for leaning back or taking money off the table. Prices have shot up housing inventory is low, making it a tough time to get cheap houses and a great time to sell at a premium. On the flip side, if investors are dropping out of the market it could allow existing or new investors better land deals and a larger piece of the investment pie.