Investors Still Finding Ample Opportunities in Distressed Market

Residential properties sold at a faster pace in September according to a recent report from RealtyTrac.

Single-family homes, condominiums, and townhomes sold at an annualized pace of 5,673,249 in September, up 2 percent from August and up 14 percent year-over-year, indicating that the market is still ripe for investors with deep pockets looking to make an imprint on regional markets.

“The housing market continues to skew in favor of investors, particularly deep-pocketed institutional investors, and other buyers paying with cash,” said Daren Blomquist, vice president at RealtyTrac.

“While the institutional investors are pulling back their purchases in many of the higher-priced markets-places like San Francisco, Washington, D.C., New York, Seattle and Sacramento-they are continuing to ramp up purchases in markets where median prices are still below $200,000-places like Jacksonville, Atlanta, Charlotte, St. Louis and Dallas,” Blomquist said.

“The availability of distressed inventory also makes a difference. For example, institutional investor purchases have rebounded in Las Vegas corresponding to a recent rebound in foreclosure activity there,” he continued.

In September, the median price of a distressed residential property-in foreclosure or bank-owned-was $112,000, 41 percent below the median price of $189,000 for a non-distressed residential property. Distressed sales continued to account for a portion of all sales, climbing to 25 percent, up from 18 percent of all sales a year ago.

“Distressed sales remain persistently high, particularly short sales,” Blomquist added. “Markets with the biggest increases in short sales tend to be those where either foreclosure starts or scheduled foreclosure auctions have rebounded in the last 18 months – translating into more motivated short sellers – or those with a still-high percentage of underwater homeowners with negative equity.”

Institutional investors, those purchasing 10 or more properties in the last 12 months, comprised 14 percent of all sales in September. This figure is up 9 percent since September 2012. Investors flocked to big cities for investment, with Atlanta, Georgia being the biggest big city (defined as a metro area with more than 1 million people) with 29 percent of purchases by institutional investors.

The report shows that home price appreciation showed signed of plateauing in these top six appreciating markets. In all six markets, the annual increase in home prices was down compared to previous months this year.


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