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Institutional Investor Participation in U.S. Residential Sales at 4-Year Low

Institutional Investor Participation in U.S. Residential Sales at 4-Year Low

Residential News » Miami Edition | By Michael Gerrity | November 6, 2014 8:00 AM ET



According to RealtyTrac's Q3 2014 U.S. Institutional Investor & Cash Sales Report, which shows that sales to institutional investors -- entities that purchase at least 10 properties in a calendar year -- accounted for 4.3 percent of all sales of single family homes and condos in the second quarter, down from 5.0 percent in the previous quarter and down from 5.3 percent a year ago to the lowest level since the fourth quarter of 2010.

Meanwhile all-cash sales accounted for 33.9 percent of all sales of single family homes and condos nationwide in the third quarter, down from 36.9 percent in the second quarter and unchanged from a year ago.

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Daren Blomquist

"Cash sales continue to be an important piece of the real estate puzzle right now, representing one in every three home sales nationwide in the third quarter of 2014 and helping to drive up U.S. median home prices 38 percent over the last two and half years," said Daren Blomquist, vice president at RealtyTrac. "As institutional investors and other cash buyers slow down their purchasing in many markets across the country, more traditional buyers -- including first-time homebuyers and move-up buyers -- will need to increasingly fill in the missing puzzle pieces to maintain the momentum of the housing recovery.

"Institutional investors are still actively purchasing single family rentals, but continue to gravitate toward markets where lower-end inventory is still available," Blomquist continued. "Meanwhile there has been a recent surge in cash buyers in some markets, often coinciding with either a rebound in distressed sales attracting bargain-hunting cash buyers or a booming job market engendering a competitive bidding environment where cash is king."

Highest institutional investor share in Memphis, Charlotte, Columbus

Among metropolitan statistical areas with a population of at least 500,000, those with the highest share of institutional investor purchases in the third quarter were Memphis, Tenn. (16.4 percent), Charlotte-Gastonia-Concord, N.C, (14.2 percent), Columbus, Ohio (12. 6 percent), Atlanta-Sandy Springs-Marietta, Ga., (12.5 percent), and Orlando, Fla. (11.0 percent).

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Institutional investor share increases in Charlotte, Columbus, Orlando, and Miami

Although Memphis documented the highest share of institutional investor sales in the third quarter, its 16.4 percent share was down from a 20.3 percent share a year ago. The institutional investor share of home purchases was also down from a year ago in Atlanta, but increased from a year ago in Charlotte, Columbus and Orlando, bucking the national trend.

Other metro areas among the top 20 for institutional investor share with increases from a year ago were Miami, Fla. (8.6 percent compared to 6.3 percent a year ago), Tampa, Fla. (8.6 percent compared to 7.5 percent a year ago), Dallas, Texas (8.5 percent compared to 8.4 percent a year ago), Kansas City (7.4 percent compared to 7.0 percent a year ago), and Knoxville, Tenn. (7.0 percent compared to 4.5 percent a year ago).

The share of institutional investor sales increased from a year ago in eight states, including Iowa (8.4 percent compared to 3.6 percent a year ago), Ohio (5.9 percent compared to 4.1 percent a year ago), Maryland (4.4 percent compared to 3.5 percent a year ago), and Florida (7.2 percent compared to 6.4 percent a year ago).

Cash sales share up in Houston, San Antonio, Boston, Dallas, and Indianapolis

Among major metro areas, the biggest increases in the share of cash sales were in Houston (36.3 percent compared to 22.6 percent a year ago); San Antonio (30.9 percent compared with 21.1 percent a year ago), Boston (29.1 percent compared to 20.7 percent a year ago), Dallas (30.0 percent compared to 21.5 percent a year ago), Indianapolis (29.2 percent compared to 22.3 percent a year ago), and Cleveland (45.2 percent compared to 35.8 percent a year ago).

The share of cash sales increased from a year ago in 22 states, including Texas (32.4 percent compared to 21.5 percent a year ago), Indiana (31.1 percent compared to 21.7 percent a year ago), Massachusetts (30.7 percent compared to 24.0 percent a year ago), and Connecticut (36.9 percent compared to 31.8 percent a year ago.

Florida has the top five metros for cash sales share, all above 50 percent

Among metropolitan statistical areas with a population of at least 500,000, those with the top five highest percentages of cash sales were all in Florida: Miami-Fort Lauderdale-Pompano Beach (59.1 percent), Cape Coral-Fort Myers (55.8 percent), Sarasota-Bradenton-Venice (54.5 percent), Tampa-St. Petersburg-Clearwater (51.1percent) and Palm Bay-Melbourne-Titusville, Fla. (50.9 percent).

Other major metro areas with an all-cash share among the top 20 highest nationwide were Cleveland, Ohio (45.2 percent), Cincinnati, Ohio (43.0 percent), Syracuse, N.Y. (42.3 percent) and Greensboro, N.C. (41.0 percent).

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