Institutional Investor Share of U.S. Residential Sales Drops to Four-Year Low in Q3 2014, Cash Sales Also Lower

Cash Sales 33.9 Percent Share, Institutional Investor Purchases 4.3 Percent Share;
Cash Sales Share Increases in 22 States, Including Texas, Indiana, Mass., Conn.

IRVINE, Calif. – Nov. 6, 2014 — RealtyTrac® (www.realtytrac.com), the nation’s leading source for comprehensive housing data, today released its Q3 2014 U.S. Institutional Investor & Cash Sales Report, which shows that sales to institutional investors — entities that purchase at least 10 properties in a calendar year — accounted for 4.3 percent of all sales of single family homes and condos in the third quarter, down from 5.0 percent in the previous quarter and down from 5.3 percent a year ago to the lowest level since the fourth quarter of 2010.

Meanwhile all-cash sales accounted for 33.9 percent of all sales of single family homes and condos nationwide in the third quarter, down from 36.9 percent in the second quarter and unchanged from a year ago.

“Cash sales continue to be an important piece of the real estate puzzle right now, representing one in every three home sales nationwide in the third quarter of 2014 and helping to drive up U.S. median home prices 38 percent over the last two and half years,” said Daren Blomquist, vice president at RealtyTrac. “As institutional investors and other cash buyers slow down their purchasing in many markets across the country, more traditional buyers — including first-time homebuyers and move-up buyers — will need to increasingly fill in the missing puzzle pieces to maintain the momentum of the housing recovery.

“Institutional investors are still actively purchasing single family rentals, but continue to gravitate toward markets where lower-end inventory is still available,” Blomquist continued. “Meanwhile there has been a recent surge in cash buyers in some markets, often coinciding with either a rebound in distressed sales attracting bargain-hunting cash buyers or a booming job market engendering a competitive bidding environment where cash is king.”

Highest institutional investor share in Memphis, Charlotte, Columbus
Among metropolitan statistical areas with a population of at least 500,000, those with the highest share of institutional investor purchases in the third quarter were Memphis, Tenn. (16.4 percent), Charlotte-Gastonia-Concord, N.C, (14.2 percent), Columbus, Ohio (12. 6 percent), Atlanta-Sandy Springs-Marietta, Ga., (12.5 percent), and Orlando, Fla. (11.0 percent).

Institutional investor share increases in Charlotte, Columbus, Orlando, Miami
Although Memphis documented the highest share of institutional investor sales in the third quarter, its 16.4 percent share was down from a 20.3 percent share a year ago. The institutional investor share of home purchases was also down from a year ago in Atlanta, but increased from a year ago in Charlotte, Columbus and Orlando, bucking the national trend.

Other metro areas among the top 20 for institutional investor share with increases from a year ago were Miami, Fla. (8.6 percent compared to 6.3 percent a year ago), Tampa, Fla. (8.6 percent compared to 7.5 percent a year ago), Dallas, Texas (8.5 percent compared to 8.4 percent a year ago), Kansas City (7.4 percent compared to 7.0 percent a year ago), and Knoxville, Tenn. (7.0 percent compared to 4.5 percent a year ago).

The share of institutional investor sales increased from a year ago in eight states, including Iowa (8.4 percent compared to 3.6 percent a year ago), Ohio (5.9 percent compared to 4.1 percent a year ago), Maryland (4.4 percent compared to 3.5 percent a year ago), and Florida (7.2 percent compared to 6.4 percent a year ago).

Among the nation’s largest metro areas, the biggest decreases in institutional investor share of sales were in Boston (0.6 percent compared to 1.5 percent a year ago), San Diego (1.4 percent compared to 3.7 percent a year ago), Los Angeles (1.6 percent compared to 3.9 percent a year ago), Minneapolis (2.6 percent compared to 4.9 percent a year ago), and Phoenix (6.6 percent compared to 11.7 percent a year ago).

“Institutional investors, who flooded the market a couple of years ago, are starting to sell their inventory for substantial gains,” said Chris Pollinger, senior vice president of sales at First Team Real Estate, covering the Southern California market. “Meanwhile, first time buyers are still underrepresented because of affordability challenges in the Southern California marketplace.”

Cash sales share up in Houston, San Antonio, Boston, Dallas, Indianapolis
Among major metro areas, the biggest increases in the share of cash sales were in Houston (36.3 percent compared to 22.6 percent a year ago); San Antonio (30.9 percent compared with 21.1 percent a year ago), Boston (29.1 percent compared to 20.7 percent a year ago), Dallas (30.0 percent compared to 21.5 percent a year ago), Indianapolis (29.2 percent compared to 22.3 percent a year ago), and Cleveland (45.2 percent compared to 35.8 percent a year ago).

The share of cash sales increased from a year ago in 22 states, including Texas (32.4 percent compared to 21.5 percent a year ago), Indiana (31.1 percent compared to 21.7 percent a year ago), Massachusetts (30.7 percent compared to 24.0 percent a year ago), and Connecticut (36.9 percent compared to 31.8 percent a year ago.

Some of the biggest decreases in cash sales among major metro areas were in Buffalo, N.Y. (15.2 percent compared to 30.8 percent a year ago), Dayton, Ohio (38.3 percent compared to 63.2 percent a year ago), Milwaukee, Wis., (27.2 percent compared to 43.6 percent a year ago), Madison, Wis., (19.0 percent compared to 29.3 percent a year ago), and Minneapolis (22.8 percent compared to 32.0 percent a year ago).

“In recent months the Ohio markets have noticed a gradual decline of cash sales influencing the market, as greater financing resources have been made available in support of consumers,” said Michael Mahon, executive vice president/broker at HER Realtors, covering the Columbus, Cincinnati and Dayton, Ohio markets.  “As concerns over the next phase of Dodd-Frank federal restrictions loom for 2015, the government should become more focused on assisting consumers with down payment assistance, restructuring of education debt and other such programs assisting consumers to qualify for the American dream of home ownership.

“Growth in home sales and new home construction are the primary foundation for job growth nationally, and where government resources should be focused in assisting economic growth for 2015,” Mahon added added.

Florida has the top five metros for cash sales share, all above 50 percent
Among metropolitan statistical areas with a population of at least 500,000, those with the top five highest percentages of cash sales were all in Florida: Miami-Fort Lauderdale-Pompano Beach (59.1 percent), Cape Coral-Fort Myers (55.8 percent), Sarasota-Bradenton-Venice (54.5 percent), Tampa-St. Petersburg-Clearwater (51.1percent) and Palm Bay-Melbourne-Titusville, Fla. (50.9 percent).

Other major metro areas with an all-cash share among the top 20 highest nationwide were Cleveland, Ohio (45.2 percent), Cincinnati, Ohio (43.0 percent), Syracuse, N.Y. (42.3 percent) and Greensboro, N.C. (41.0 percent).

Cash sales account for larger share of very high-end, low-end and distressed sales
Cash sales in the third quarter skewed higher on both ends of the home price spectrum. Cash sales accounted for 64 percent of purchases of homes selling for $100,000 or less, and cash sales accounted for 41 percent of purchases of homes selling for more than $2 million.

Cash sales represented a larger share of distressed sales, accounting for 54.6 percent of distressed sales — sales of homes in the foreclosure process or bank-owned.

Report methodology
The RealtyTrac U.S. Institutional Investor & Cash Sales Report provides percentages of all sales that are sold to institutional investors and cash buyers, by state and metropolitan statistical area. Data is also available at the county and zip code level upon request. The data is derived from recorded sales deeds and loan data. Statistics for previous quarters are revised when each new quarterly report is issued as more deed data becomes available for those previous months.

Definitions
All-cash purchases: sales where no loan is recorded at the time of sale and where RealtyTrac has coverage of loan data.

Institutional investor purchases: residential property sales to non-lending entities that purchased at least 10 properties in the last 12 months.

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The RealtyTrac U.S. Institutional Invest & Cash Sales report is the result of a proprietary evaluation of information compiled by RealtyTrac; the report and any of the information in whole or in part can only be quoted, copied, published, re-published, distributed and/or re-distributed or used in any manner if the user specifically references RealtyTrac as the source for said report and/or any of the information set forth within the report.

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