Today’s Real Estate Investors: A Vital Force in America’s Communities

Homeowners flinching at the latest home price reports may not be in a grateful mood right now.  But what they may not realise is that property values could be in worse shape if not for the recent actions of many unsung players in their local housing markets — investors.

Today, while investors make up less than 20 per cent of all home buyers[1], in recent months they’ve been quietly buying approximately 35 per cent of all homes sold each month.[2] Even more intriguing, investors are expected to become three times more active than typical homebuyers in the next two years, based on data from a new investor survey recently conducted for Move, Inc.

While there’s nothing new about investing in real estate, today’s climate has made it an attractive option for a wide variety of little known buyers in thousands of communities across the country. Many are typical homeowners who probably won’t or can’t sell their existing home at today’s prices.  Instead, they opt to rent them out until prices improve.  Others are taking advantage of low prices to buy second homes or retirement properties as long term investments, and then rent them until they’re ready to use the property themselves.

They also don’t fit the stereotypical deal driven buyer known as a ‘flipper.’   Most real estate investors today are beginners; only 36 per cent have done more than one deal.[3] Most are financing over 50 per cent of the transaction; only 18.5 per cent will use all cash.  They also have a heightened interest in their local communities; 62 are paying more attention to local home values today than they were a year ago.  Two-thirds say they’re investing for the long term and half plan to hold their properties for five years or more. 

It’s also important to keep in mind that today’s investors do more than just reduce local housing inventory with their purchases.  Many repair the properties they buy and then live in them until they’re ready to sell or return them to the community as rentals or restored properties for sale.  For many it’s a labour of love; some 42 per cent of investors[4] save money by doing the work themselves. 

For some, the decision to venture into real estate investing is simply a matter of economics and opportunity.  They see prospects for a 10 to 20 per cent gain over five years as a real estate investor, where others see overstocked housing inventories with little chance of earning value.  They see stock market investments in today’s recessionary climate are only yielding 1.6 per cent a year over five years.[5] They also see the potential to regain recent portfolio losses within a local housing market they know and probably lived in for many years.  It’s a once in a lifetime opportunity for many that cannot and must not be ignored.

Local real estate investors are a more vital force in the marketplace today than perhaps at any other time in recent history.  They are a little known factor that’s shoring up many local housing markets.  One might even say American entrepreneurialism is helping to preserve the American dream of homeownership.

In the next few years, it’ll be very interesting to see how they fare as the market changes.  In the interim, let’s give them credit for the role they now play in helping to keep local housing markets alive.

By Steve Berkowitz

Chief Executive Officer, Move, Inc.

[1] Move investor survey.Q4. BUYER 4-21-11.

[2] NAR Economists Commentary, May 2011.

http://www.realtor.org/research/reinsights/economistcommentary

[3] Move Investor survey, Q5. BUYER-SUPP. 4.21.11

[4] Move Investor Survey, April 15 – 17, 2011, Q10

[5] Dow-Jones Industrials Closing Price January 3, 2006 to January 3, 2011.  http://markets.financialcontent.com/gatehouse.uticaod/quote/historical?Month=1&Symbol=DJ%3ADJI&Year=2011&Range=3

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