As the real estate market makes a joyous recovery, the media is ablaze
with evidence that investment buyers are retreating—or are they?
While many institutional and cash buyers flocked to the market last
year, snatching up distressed properties, erasing shadow inventory and
driving up prices, we are currently seeing a decrease in interest from
these “get rich” investors.
Investors accounted for 20.2 percent of home purchases in May—still
high, but down from a peak of 23.1 percent reached in February,
according to the Campbell/Inside Mortgage Finance survey of real estate
conditions.
Reports from the National Association of REALTORS® show a decline in
foreign buyers — a big source of investors in U.S. single family homes
and condominiums, and a recent release by RealtyTrac show that hedge
fund investors are slowing as well.
However, while last year's house-hungry investors seem to be packing
away their cutlery, a new breed of investors are approaching the table.
These conservative, or “value,” investors are purchasing properties in
cities that are showing sustainable promise.
Instead of hunting for discounts, value investors seek stability. They
track where people are moving, where the job market is growing, and
where home prices have been the most stable.
“They recognize that housing, when it performs normally, generates a reliable dividend and a reliable capital appreciation.”
According to a recent survey released by Bankrate.com, real estate is
still America's second favorite investment—after cash. And with the
market turning around, more of these reliable investors will come into
the fold.
CoreLogic’s Pending HPI released this week showed that July 2013 home
prices, including distressed sales, are expected to rise by 12.5 percent
on a year-over-year basis from July 2012 and rise by 1.8 percent on a
month-over-month basis from June 2013, the fastest pace since 1977.
“In the first six months of 2013, the U.S. housing market appreciated a
remarkable 10 percent,” said Dr. Mark Fleming, chief economist for
CoreLogic. “This trend in home price gains is moving at the fastest pace
since 1977.”
This stability is what draws in the new breed of investors. “They aren't
looking for a quick hit, but a long term business,” says Greg Rand, CEO
of OwnAmerica. “Volatility repels them, and strong fundamentals attract
them,” says Rand.
While the fast-acting investors of the past did help heal the market, this new breed of investors will sustain it.
“They are buying intelligently, choosing great cities with stable
performance and buying nice houses for long term rental,” says Rand.
“Texas, Carolinas, Tennessee, Ohio are all getting much busier now, but
with that conservative business strategy.”
“It's the mid cap investor that I see as the greatest opportunity,” says
Rand. “Folks investing between $5 million and $100 million in single
family homes in a few cities.” These are a massive new corporate
clientele for the real estate industry that, according to Rand, will
impact the housing market in a largely positive fashion.
The value investor is responsible with their market choice, slowly but
surely integrating themselves as a permanent class of reliable
homeowner.
Reprinted with permission from RISMedia. ©2013. All rights reserved.
2 thoughts on “A New Breed of Real Estate Investor: The Value Investor”
September 24, 2013
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September 24, 2013
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