Foreclosures and short sales are getting less attention on two fronts, according to RealtyTrac’s Residential & Foreclosure Sales Report for January.
First, institutional investors — entities which purchase at least ten properties per year — accounted for 5.2 percent of all U.S. residential property sales in January, down from 8.2 percent in January 2013. The January share of institutional investor purchases, said RealtyTrac, represented the lowest monthly level since March 2012 — a 22-month low.
Metro areas with big drops in the Wall Street institutional investor share from a year ago, says RealtyTrac, included 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).
The company also reports that counter to the national trend, 23 of the 101 metros analyzed in the report posted year-over-year gains in institutional investor share, including Atlanta (up 9 percent), Austin, Texas, (up 162 percent), Denver (up 21 percent), Cincinnati (up 83 percent), Dallas (up 30 percent), and Raleigh, N.C. (up 15 percent).
Metro areas with the highest share of institutional investor purchases included Jacksonville, Fla. (25.5 percent), Atlanta (25.1 percent), Austin, Texas (18.0 percent), Charlotte, N.C. (14.9 percent), and Greenville, S.C. (14.0 percent).
Meanwhile, while big institutional investors are reducing purchase activity smaller investors are plainly in the marketplace. All-cash sales, said RealtyTrac, accounted for 44.4 percent of all U.S. residential sales in January, the seventh consecutive month where all-cash sales have been above the 35 percent level.
Foreclosures and Short Sales
Second, the RealtyTrac report also shows that distressed property transactions such as short sales and foreclosures — including both sales to third party buyers at the public foreclosure auction and sales of bank-owned properties — accounted for a combined 17.5 percent of all U.S. residential sales in January 2014, down from 18.7 percent a year ago.
“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,” said RealtyTrac Vice President Daren Blomquist. “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.”
Local Market Results
“We have seen the big hedge fund investors entering into particularly the Columbus and Cincinnati markets, trying to buy up portfolios of distressed properties and then turning those properties into rentals, and I think that’s contributing to the lower levels of inventory available on the market.” said Michael Mahon, Executive Vice President at HER Realtors, covering the Columbus, Cincinnati and Dayton markets in Ohio. “We’ve also seen a dramatic decrease in short sales because of the expiration of the Mortgage Forgiveness Debt Relief Act, which provided short sellers protection from being taxed on debt forgiven through a short sale.”
“Buyers are starting to emerge again, and we are seeing multiple offers on REO properties due to low levels of available homes on the market,” said Sheldon Detrick, CEO of Prudential Detrick/Alliance Realty covering the Oklahoma City and Tulsa, Okla., markets. “Increased demand of properties and reduced supply of housing inventory result in price escalation, which explains the continued increase in home prices throughout the market.”
“The Denver metro area did not experience the typical winter slowdown that many markets across the country experienced and we continue to be very busy,” said Chad Ochsner, owner of RE/MAX Alliance covering the Denver, Colo., market. “Our January year-over-year sales counts are up about 7 percent, which is really encouraging. I think it has a lot to do with improved consumer confidence and low interest rates.”
“The Salt Lake Valley market is showing a 5 percent decrease in the number of residential properties sold compared to last year, but the market is still in line with projected home price increases of 5 to 7 percent,” said Steve Roney, CEO of Prudential Utah Real Estate covering the Salt Lake City and Park City, Utah markets. “Housing inventories remain low, but are gradually growing as underwater homeowners regain equity positions in their homes.”
“The Park City resort market tells a different story with a slight increase in the number of properties sold and a slight decrease in median sales prices. Park City housing inventory is at a historic low with significant demand for entry-level housing and ultra-high-end resort properties,” he added.
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