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Institutional Investor Trends in Atlanta and Their Impact on Housing

In a recent report, ""Radar Logic"":http://www.radarlogic.com/ closely examined purchase trends and patterns from institutional investors in the Atlanta area. Among its findings, the research firm found investors have been targeting a different cross-section of homes compared to traditional buyers.


According to the report, institutional investors are more likely to purchase homes that are cheaper, smaller, and located in lower-income areas compared to homes bought by non-investor buyers.

In February 2013, the majority of institutional investor purchases fell in the range of $37 to $64 per square foot, as opposed to most other transactions, which tended to be priced between $52 and $109 per square foot.

Overall, institutional investors were also more likely to buy homes that were one or two bedrooms. For example, institutional investors had a preference for homes that were between 1,100 to 2,000 square feet, with 59 percent of investors buying homes in the size range compared to 42 percent for other buyers. Investors shied away from bigger homes, with just 11 percent buying homes that were larger than 2,600 square feet versus 30 percent for other buyers.


Institutional investors were also more active in counties around the Atlanta metropolitan area where per capita income was lower.

Another common trait of investors is they tended to purchase properties from other investors or banks.

Twenty-percent of investor purchases in February were from banks or other institutions that sell REOs and foreclosures compared to 13 percent for other buyers. Furthermore, 27 percent of investor-purchased homes were bought from other institutional investors versus 12 percent for other buyers.

Over a 12-month period ending in February, Radar Logic also reported both investors and non-investors paid more per square foot.

For buyers other than institutional investors, the median price paid per square foot increased 20 percent over the last year, while the price paid by institutional investors surged 65 percent. However, institutional investors paid 34 percent less per per square foot compared to other buyers in February.

After tracking price trends for investors and other buyers, Radar Logic concluded the recovery appears to be partly driven by an increase in prices paid by non-investors as well, which suggests the improvements in housing might be sustainable.

However, the housing market in the Atlanta area still remains at risk if after some years investors exit the single-family rental market and mortgage rates are too high to encourage demand.

""If, at that time, the large investors decide to reallocate capital and downsize their portfolios of single family homes, they may put downward pressure on home prices at a time when the low mortgage rates of today are just a memory,"" the report stated.