Survey: Local Real Estate Markets Heating Up With Investors

Local reports indicate investors have been snapping up a larger share of foreclosure and REO homes in recent months, and an industry survey released Thursday suggests they are poised to become even more of a presence.
[IMAGE] According to a study conducted by ""Move, Inc."":http://www.move.com, which operates several online real estate sites, real estate investors will be more active in their local markets by a three-to-one margin compared to typical homebuyers over the next 24 months.

The ""National Association of Realtors reported"":http://dsnews.comarticles/reos-and-short-sales-slip-to-37-of-aprils-existing-home-volume-2011-05-19 just last week that all-cash transactions stood at 31 percent of all existing-home sales in April, with investors accounting for the bulk of cash purchases.

A separate ""report from Campbell Surveys"":http://dsnews.comarticles/survey-finds-first-time-buyers-in-short-supply-to-absorb-distress-2011-05-23 found that investors accounted for 23 percent of the housing market in the month of April.

The research firm noted in its release that there's a growing gap between the inventory of distressed properties on the market and the number of first-time homebuyers that typically target these homes. Campbell Surveys says when such a situation develops, it's time for investors to step into the market to buy these properties, often at bargain-basement prices.

Move Inc.’s survey suggests local markets will be heating up with investor interest. The company found that compared to a year ago, 62 percent of investors are paying more attention to home values in their local markets.

Only 43.5 percent say it will be harder to find bargains and 41.5 percent expect it’ll be easier to sell their properties in the next six months.

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Meanwhile, 22 percent of investors are bullish and expect prices to rise in the next six to 12 months, and 53.5 percent expect prices to remain relatively the same. Twenty-three percent expect prices will fall over the next year.

The Move Inc. survey also shows investors are positioned to compete with traditional first-time homebuyers for hot deals. Two-thirds of investors said they expect the problems first-time buyers are having getting mortgages to make it easier for them to compete, while eight out of 10 expect cash discounts from sellers.

Contrary to the tactics used by investors known as “flippers,” 50 percent of today’s real estate investors plan to hold their properties for five-plus years, according to the survey results. Only 11 percent expect to sell within 12 months.

“This data suggests today’s climate is hot for investing and is attracting a lot of new people that don’t fit the stereotypical deal-driven flippers that buy and sell properties quickly,” said Steve Berkowitz, CEO of Move, Inc.

“They’re mostly entrepreneurial individuals that will make vital contributions to local communities by investing their own money and sweat equity to improve and maintain properties,” Berkowitz added.

While cash is king in many circles, the survey found that 75 percent of investors plan to combine cash and credit to purchase properties as they build their real estate portfolio. In fact, nearly 60 percent plan to put less than half down on their next buy and finance the rest. Finding financing, however, was cited as one of the most difficult challenges investors face.

Based on the investments they’re making in today’s environment, real estate investors expect high yield returns, according to Move, Inc. Nearly half â€" 48 percent -- expect a profit of 20 percent or more from their property investments, a 4 percent annual rate of return over five years.

Move, Inc.’s survey results are based on 1,000 interviews conducted April 11 through 15 nationwide. The company says the margin of error on weighted data is +/- 3 percent.