Economists' Outlook

Housing stats and analysis from NAR's research experts.

Sales of Homes for Investment Purposes On the Decline

As reported in the August 2014 REALTORS® Confidence Index Report, sales to investors fell to 12 percent of home sales in August, from the average of about 18-20 percent in 2010-2013. One reason for the decline is that as foreclosures have eased there are now fewer available distressed properties for sale. Distressed sales (foreclosed property and short sales) have steadily declined from about 16 percent of existing home sales in 2010 to only 8 percent as of August 2014 (Chart 1).

Another reason is that home prices have been rising more rapidly than rents since 2012 (Chart 2), creating fewer opportunities for a quick profit recovery. Since 2012, the median home price of all existing homes rose by an average of 9 percent annually, while rents rose at an annual average of about 3.2 percent. As of August 2014, the median home price of all existing homes was at $ 219,800, just a few thousand shy of the peak price of $229,000 in June 2007. Although about 50 to 70 percent of investors pay all cash, rising home prices have also made it more difficult to put up only cash to purchase a home.

As investors will increasingly retreat from the market, the continued recovery of the housing market will need to be taken up by first-time buyers (e.g., the millennials) and those buying property to trade up (also millennials) or down (baby boomers).

CHART 1

Capture

CHART 2

Capture2

Notice: The information on this page may not be current. The archive is a collection of content previously published on one or more NAR web properties. Archive pages are not updated and may no longer be accurate. Users must independently verify the accuracy and currency of the information found here. The National Association of REALTORS® disclaims all liability for any loss or injury resulting from the use of the information or data found on this page.

Advertisement

Comment Policy

The opinions expressed in reader comments sections on this website are those of the reader and not NAR or REALTOR® Magazine.

About Economists' Outlook

Visit this blog daily to see what NAR experts are saying about the economy, the housing market, and other factors that will impact your business.

Housing Minute

Housing Minute is a monthly video series highlighting the latest housing data from the National Association of REALTORS® in a minute or less.