I thought this was an interesting article and is reflective of the markets I work in.
Institutional Interest Falls as Foreclosures and Short Sales Remain High
Institutional investors appear to feel that they have bought up all the viable rentals in many markets.
RealtyTrac’s January 2014 Residential & Foreclosure Sales Report was recently released, and shows that institutional investors’ purchases of rental homes are beginning to drop. Institutional investors, those entities purchasing at least 10 properties in a calendar year, accounted for just 5.2 percent of all U.S. residential property sales in January. This is down from 7.9 percent in December and down from 8.2 percent in January one year ago. The January 2014 figure also indicates the lowest percentage of institutional interest in the market in 22 months. Big drops in institutional interest occurred in Cape Coral-Fort Myers, Fla. (down 70 percent), Memphis, Tenn. (down 64 percent), Tucson, Ariz. (down 59 percent), Tampa, Fla. (down 48 percent), and Jacksonville, Fla. (down 21 percent). In 23 of the 101 metro areas analyzed, year-over-year gains in institutional interest occurred, including the cities of Atlanta (up 9 percent), Austin (up 162 percent), Denver (up 21 percent), Cincinnati (up 83 percent), Dallas (up 30 percent), and Raleigh (up 15 percent).[1]
Daren Blomquist, a RealtyTrac vice president, said, “Many have anticipated that the large institutional investors backed by private equity would start winding down their purchases of homes to rent, and the January sales numbers provide early evidence this is happening. It’s unlikely that this pullback in purchasing is weather-related given that there were increases in the institutional investor share of purchases in colder-weather markets such as Denver and Cincinnati, even while many warmer-weather markets in Florida and Arizona saw substantial decreases in the share of institutional investors from a year ago.”[2]
The RealtyTrac report also shows that while distressed property transactions such as short sales and foreclosures remain high, they are beginning to drop. Distressed sales accounted for a combined 17.5 percent of all U.S. residential sales in January 2014, down from 18.7 percent in January last year. While this number remains historically high, it seems to be levelling off and possibly beginning to decrease, although the total was higher than December’s reading of 14.9 percent.[3]
Do you think institutional investors are beginning to back off the rental housing market? Do you think distressed sales have seen their high-water mark?
