Are investors ruining the housing market?

Investors are buying a bigger percentage of homes than they did during the boom. Is this boosting the market or just distorting it?

By Teresa at MSN Real Estate Mar 1, 2013 1:07PM

© SuperStockWe’ve heard a lot lately about how investors are playing a major role in the housing market. Those include both individuals who buy a few rental properties and private equity funds that buy houses by the hundreds.

 

As the number of homes for sale has shrunk, first-time homebuyers and others who want to buy a home with a mortgage have been frustrated about being beaten out time and time again by investors paying all cash.

 

How many homes are investors buying? CBS MoneyWatch’s Ilyce Glink reports that in many cities, investor activity is the highest it has been in a decade.

 

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MoneyWatch asked DataQuick to look at purchases in 28 cities around the United States. The conclusion? "In all but five markets, investor activity is up over the 10-year average."

These are some of the numbers:

  • Los Angeles: 25% of purchases are by absentee buyers, compared with 11.5% at the peak of the boom in 2005.
  • Miami: 42% of purchases in 2012 were by absentee buyers, compared with 33% over the past decade.
  • Las Vegas: 51% of purchases are by absentee buyers, up from a 10-year average of 41%.
  • Cincinnati: 35% of purchases by absentee buyers, compared with 22% over the past decade.

Statistics from the National Association of Realtors show that 19% of home sales in January were to investors, compared with 23% in January 2012. All-cash sales were responsible for 28% of transactions, compared with 31% a year earlier.

What does the investor role mean for the housing market? Glink writes:

Some housing activists are crying foul over the investor-driven recovery in housing. Under this view, investors are taking away homes from people who otherwise would be able to buy an affordable property. Investment firms also act as a ready buyer for banks that opt for foreclosure and short sales over loan modifications that would keep homeowners in their homes.

The data raise an interesting question. Are investors leading the recovery and buying homes that families can’t buy, either because they can’t get mortgages, have too much debt or don’t make enough money? Or are investors keeping families out of the market by buying up all the good properties for cash, making it nearly impossible for regular buyers to compete?

 
52Comments
Aug 19, 2013 9:14PM
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I'm seeing a bunch of homes that are being offered in the market.  A quick look at their history of each home I see that they were purchased just 3 months ago at 40% less.

So let me see.  They buy these homes, wait a couple months and re-list them for 40%+ more.  Yeah, it's no wonder no one is buying it. LOL

I am a first time buyer and I cannot find a good home.  I'm seeing a bunch of run-downed, poor condition homes here in CA going for $500,000+.  You have to be kidding me.

I'm also seeing these newly built homes with a total sq footage of less than 2k, going for $600,000.  

I mean, at this point and time, I might as well look at Oregon.   CA is just horrible.  These banksters are ruining it for us.

I do hope for the next bubble to burst real soon.  And all those idiots who decided to pay cash in the hope of making it big and cry all they want.  No one will be bailing these greedy blood sucking rats out.


Jul 3, 2013 6:43PM
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May 10, 2013 7:09AM
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I could not agree more, the investors are stealing homes for decent working class Americans. It's a racket, I really hope something is done before this bubble burst.
May 4, 2013 9:19PM
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My wife and I did the same thing, we searched and would find a home that we really liked and by the time we would make an offer there would already be a cash offer on the property that was sometime listed just day before. After trying that for a week or two it became so frustating the we gave up. Talk about spinning your wheels. I final went outside my realtors advice and started looking @ Craigs List and found a hud home. I know a HUD HOME OMG. But when we went to look at it, it actual looked better than alot of the homes that we had been looking at with our realtor. The price was far below market value and it was in move in condition. We purchased the home for 180,000 and it had orginal sold 3 years prior for 425,000. You have to get creative in this seller market or you will diffinetly be let out on the cold. Explore none traditional ways of finding a properties. Don't depend soley on your realtor. The house we bought is in Las Vegas NV. The market is really heating up here.
May 4, 2013 6:40PM
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I started looking at houses last year in a different state.  I hooked up with a local banker and was told I was preapproved.  Kind of fishy, but every time I told him about a property, it was before I could even get things rolling.  Don't know if the banker was tipping someone off or the investors moved faster than my banker.  Anyway after going through about 3 or 4 houses, I decided not to tell him about the last one and guess what...I own it now and I financed it with someone else.

May 4, 2013 6:38PM
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The 3 rental properties I purchased in Phoenix were all bank-owned houses that were trashed by the previous owner.  They all sat vacant in disrepair and were on the market for months before I purchased them.  If I didn't buy them, spend tens of thousands of dollars fixing them back up, and renting them to high quality renters, the neighborhood would have continued to slide.  The way I see it --  we small-time investors, who put our own blood-sweat-and-tears into these houses for long term investment, are saving the market.  Without us taking a risk, buying activity would have continued to languish in many markets across the USA.

On the other hand, I think the big time investors, who buy up hundreds of houses, are the culprit IMHO.  They are buying entire tracts of houses sight unseen, foregoing any renovations, and putting in the first renter they can find.  This is what is hurting the surrounding neighborhoods.

So before anybody thrashes us "investors" for ruining the housing market, recognize that there are 2 completely different classes of investors.  Us small-time guys are helping in a great way.  It's the big-time bulk buyers who continue to ruin it.  And you can thank Fanny Mae and President Obama for that mess, because they had the bright idea of selling the tracts of houses to the investors to begin with!
May 4, 2013 4:43PM
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wasn't for investors these run down forclosed homes would just sit there and never be fixed and put back on the market

 

May 4, 2013 4:09PM
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You bet they ruin the market and they've ruined many housing developments in our city.  They come in and buy buy buy in some areas where there isn't an appropriate ceiling put on what percentage of homes can be purchased for rental income.  Some don't adequately screen who they rent to and that causes the first round of problems because they rent to people who are drug dealers and professional thieves.  The thieves  rent 2 story homes with lots of window so they can watch their neighbors and rob them  while they're gone.  Oh and often times the investors never pay HOA dues which screws up the HOAs' budgets.   Some investors buy too many homes in some areas and as people lose their jobs or are transferred to other states they end up with vacant properties they can't rent out again.  Once that starts if the properties aren't cared for weeds build up and the properties fall prey to thieves who'll strip the houses down like a car gets stripped in a ghetto - wiring, appliances, copper, you name it - if the thieves can get it out they take it.  Windows get broken and the entire house ends up being almost worthless.  When that happens often times those investors just walk away leaving the house to be boarded up by the city at the taxpayers expense. Those investors are no better than slum lords. They're selfish, greedy and care nothing about what happens to those neighborhoods where hard working decent people have purchased homes to raise their families in and other folks have purchased their retirement homes.  Those people are left living in devalued areas that end up looking like a war zone. Shame on all the irresponsible investors!!!!!!!!!!!!!
May 4, 2013 3:54PM
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As first time home buyers, we've lost an amazing one time in a life time kind of deal on a 30X100 home...All brick 3/3BR 1 1/2 bath on each floors. Open concept type of living room/kitchen/dinning. This was a short sale the bank didn't hesitate taking our offer of $360K.....a few weeks later seller not signing any other paperwork as we learned that an Investore got in the way god knows with what sceaming scam type of offer to the seller which made her put everything on hold. Unfortunetly our loan expired and luckely for us wencovered all of our deposit to secure the deal. This isn't right at all.. For those who live in NYC or have some sort of knowledge as to what the market looks like here, they'll know that even cost of breathing will make anyoen loose an arm and a leg. Now we have these "all cash offers dealers looking to buy cheap and make twice as much in profit....Not fair at all. 
May 4, 2013 3:16PM
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My husband and I have been searching for a home for almost a year. We are first time home owners trying to get out on our own and our from my parents roof. Thanks to the "investors" we have lost out on over a dozen offers. We don't have tens of thousands to put cash down on a home. I feel that those who are not investors should have the chance to purchase the home first. If no one offers with in an allotted time, then let the investors place their cash offers in.

 

We are pre-approved and have all our ducks in a row, we are loosing to the cash offers made by investors.

May 4, 2013 2:21PM
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My wife an I have bought 2 investment properties in the past three years.  Both foreclosures.  It is not  easy.  It took seller 6 months to close because they could not find the title.  Do you have the time? We bid on dozen every year but will not spend more than we can get back. In both cases the places were trashed and we spent moth and thousands rehabbing before we rented them.  We won't make any money until the market turns around  and sell them but his is our retirement plan as my company closed and I lost my pension.
May 4, 2013 1:53PM
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the top 1% tend to sway the market one way or another...best not invest unless you are invited to the meeting on where to put it or when to take it out
May 4, 2013 12:36PM
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Turn in your Semiautomatic Rifles, Turn in your Hand Guns, Turn in your Long Guns. The POLICE / government will take care of you, "WHEN THE BAD GUYS ARE AT YOUR HOUSE."

May 4, 2013 8:10AM
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I think that a lot of these buyers that are being outbid by investors are wanting to get houses that are either foreclosed or short sales and are priced under market.  Investors have an advantage in this situation as they can pay cash, which is less of a hassle for the seller. 

 

What is the market with traditional owners selling their houses priced at full market value?  My guess would be that investors would be less interested in these homes, as they don't want to pay full market value and are looking to maximize their profit. 

 

I think buyers see the prices of foreclosed homes and think that is the price they should have to pay, when the market price for regular sales is actually higher. 

May 4, 2013 6:52AM
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Answer: Buying up all the good properties for cash, making it nearly impossible for regular buyers to compete?
May 4, 2013 5:48AM
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Investors was the root cause of our last housing crash. Flippers pushing average familys out of the market or forcing them into a variable mortgage which should have NEVER been offered to an average person who just wants a house to be a forever home.
May 4, 2013 5:07AM
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Awk! A critical piece of data is missing in this article; how many investor types are in specific market areas. Is there a trend? A whole bunch of small investors, buying 1-10 homes is competitive and reflects a healthy capitalist system. They buy in hopes that prices will rise soon and make a profit. But if only a few, say 3 or 4 big investment firms are buying 60% - 70% of the homes, then this is a broken system. This could be an effort to corner the market to "make" prices go up by significantly reducing supply. Superficial research, lazy news reporting. Half the facts is not the truth.
May 4, 2013 4:13AM
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most investors buy because of value.  we buy at 25 cents on the dollar.  most of my properties had been on the market for years.  where were these home activists then?  they cry foul when I buy yet they sit on the sidelines for months or years watching the property set.  they are, I  believe, as responsible for the crash as the big banks.  all want something for nothing.
May 4, 2013 1:54AM
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My Wife and I have been hunting for a Home for 2+ years, but every time we found a Home we loved, some invester came along and outbid us taking out our dream of owning our own.

Now that the housing market is on the recovery, our dream is moving farther and farther away faster and faster.

We both are employed full time but when the economy tanked, I had lost my employment and was left unemployed for 2.5 years, thankfully I found a new job, Worked Tirelessly to restore my credit only to find out ....it still is not good enough to compete with investors.

bank's wont look at us due to our debt to income ratio, not considering if we were able to buy a home ....our debt to income would be able to recover faster then it would be able to if we are forced to remain renting.

 

So invester's ...you win this battle we cannot compete with y'all, so enjoy yer properties and well ....what else i have to say is not at all polite ...so I will just end it here.

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