With Buyers Scarce, Investors Rule Housing Market

If you think there’s no competition in this sluggish real estate market, think again.

A survey released Thursday by online real-estate firm Move Inc. suggests housing markets around the country are heating up with more activity from investors. The survey of 1,000 investors found that they will be more active than typical homebuyers by 3:1. More than half think prices will stay about the same over the next six months to a year, but 22% said prices will rise. And 23% said prices will fall.

For the traditional homebuyer, the flood of investors represents robust competition. Why will investors usually win out? Two-thirds surveyed say first-time home buyers’ struggles to secure a mortgage actually helps investors; investors can often pay cash and command deep discounts for doing so.

How this plays out on the ground was the lead anecdote in a recent Wall Street Journal story:

It took Susan Hunter just one month to unload her home in Redondo Beach, Calif., last fall. But she has been outbid on four homes at a lower price point in Eagle Rock, an emerging neighborhood in northeast Los Angeles. Some sold to investors who paid cash. Other listings, she says, are being resold by investors at prices that she says are too high.

“It’s the Wild West out here. It’s a daily, tireless search,” says Ms. Hunter, who works in television production and marketing. Demand is up because “we haven’t been able to find homes here below $500,000 since the 1990s.”

Among other key findings of the survey:

  • Farewell, flippers. Half of the investors surveyed say they plan to hang onto their properties for five or more years.
  • Hello, newbies. A whopping 59% are new to real estate investing.
  • Cash is king but… more than three-quarters plan to combine cash and credit to build their real estate empires.
  • What happens when they all want to sell? Great expectations reign. Nearly half expect a profit of 20% or more.
via blogs.wsj.com May 26, 2011, 10:43 AM ET
By S. Mitra Kalita

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