One of the things that keeps folks in the owner-occupant side of the business up late into the night is the fear that the hundreds of thousands of small real estate investors who saved their cookies during the depths of the housing depression now are going to sell their rental properties all at once because prices are rising…rising in answer to seven years of prayers from the very same owner-occupant folks.
You see, it’s OK for homeowners to sell because they are making way for another worthy homeowner and maybe they’ll use their proceeds to buy another home. That’s called the housing ladder.
When an investor sells a rental that they bought as a foreclosure and spent serious money to rehab–even if there’s such a shortage of homes that people are “flash selling” houses in 24 hours–that’s called flipping.
In response to this phobia, several organizations have conducted “cash out or rent on” surveys to provide some sort of perspective.
I must confess that I include a question on cashing out in a Memphis Invest survey we released in early June, about seven months ago.
We found that 9 percent of investors plan to sell out within a year and 23 percent in one to five years. Over half of investors who own rental properties plan to hold them for at least five years or more. One-third, 33 percent, of investors plan to keep them for 10 years or more.
Today the California Association of Realtors released a similar study of investors, which found, in part, that 64 percent of investors who worked with a Realtor indicated they are going to keep the property for more than a year, while about one-third (36 percent) of investors intend to sell the property within a year. Three-fourths of buyers intend to keep the property for less than six years.
Taken together and purged of spin, these surveys could send a chill up an economist’s spine. Between 9 and 36 percent want to sell within the year. The higher figure is CAR, which makes sense since prices have been zooming there. In our national survey, 23 percent want to sell within five years.
I’m not going to extrapolate those percentages to real numbers because the data is not very good, but you get the picture. Because of higher prices resulting from the housing economy, enough landlords want to sell to make a dent on the housing recovery. Go figure.