The Return of the Investor

Investor buyers are back and help explain some of the resurgence in sales we have seen lately.  Investor sales now constitute nearly 26 percent of total sales in markets tracked by a Real Estate Consulting firm in California.   The percentage is higher than the peak of 24 percent in  2005-2006, and  much higher than the 21 percent in 2008. 

Conversations with investors reveal that many are looking to rent the properties they buy, as opposed to flipping them as was common in the up-cycle, although there are flippers this time around as well.  With the cost of homeownership falling to or even below rental parity in many markets, investors are increasingly able to make these investments cash flow positive by making a large down payment.

With limited mortgage availability, investors are generally required to make large downpayments, thus lessening the possibility of future distress, as most investors will not be forced to sell under duress and the odds of the house being worth less than the mortgage are very low. If investors flood the market to take profits, then housing will have rebounded—so increasing investor activity is a positive scenario.