Investor Power Flexes its Muscles


Last week three significant news releases, one after the next, testified to the extraordinary, unprecedented and ever-increasing power investors wield today in the residential real estate marketplace.

The first piece of good news came with the monthly Campbell/Inside Mortgage Finance Housing Pulse survey which found that the market share of investors buying homes has surged from 20.9 percent of all transactions in September 2011 to 24.2 percent of all transactions in February 2012. The investor share of short sales likewise grew from 25.9 percent to 30.6 percent during the same six-month period.  In contrast, the proportions of first-time homebuyers and current homeowners purchasing short sales have dropped since September.

The second piece of good news was NAR’s existing home sales report, which virtually confirmed the Campbell survey— that investors purchased 23 percent of homes in February compared to 20 percent in February 2011. The first-time buyer market share, on the other hand. Is shrinking, accounting for 32 percent of transactions in February, down from 33 percent in January and 34 percent in February 2011.

The grand finale was NAR’s annual Investment and Vacation Homes report which found that Investors bought 1.23 million homes last year, accounting for 27 percent of all existing homes bought in America, the greatest annual market share for investors ever recorded.

When I worked at NAR we thought of this as the “second home” report, lumping together all purchases that weren’t primary residences.  That might have been OK five years ago, but not today.

Today the report is still touted on NAR’s home page.  “Investment and Vacation Sales Surge” says the headline.  Not so.  Vacation sales rose 7.0 percent to 502,000 in 2011 from 469,000 in 2010 and accounted for 11 percent of the market.  Investment purchases rose 64.5 percent.  Which “surged” and which had a nice modest increase?

Here’s my question.  Not to pick on the NAR survey, which is a fine survey and we would be poorer without it, but when will the investment sector get the respect it so rightly deserves?

We talked about this a lot at the BP Summit, and it is no longer an academic question.  As long as investors are lumped in with vacationers and in a dozen other ways treated like second class citizens in the world of residential real estate, we shouldn’t be surprised if the occasional governmental policy (like the anti-flipping rule) takes a smack at us, or if a real estate pooh bah or passive investor shies away.

This column is too brief for that discussion.  For now, it’s enough to take note of these numbers because they don’t lie.  We investors flex our muscles in the marketplace.  We cast a vote for respect with every property we buy that no one else wants.


About Author

Steve Cook is the editor of Real Estate Economy Watch and writes for a several leading outlets in addition to BiggerPockets, including Equifax and Total Mortgage. He also provides communications consulting services to leading real estate companies. Previously he was vice president of public affairs for the National Association of Realtors.


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