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Investments

Where is all that investor and all-cash action?

The top housing markets where investors see profit

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More than four in 10 residential property sales in the first quarter this year were all-cash sales, the highest level since RealtyTrac began tracking all-cash purchases in the first quarter of 2011.

And institutional investors — entities that have purchased at least 10 properties in a calendar year — accounted for 5.6% of all U.S. residential sales in the first quarter.

So where is all the action?

If you’re talking institutional investors, it’s mostly in the smaller markets and the states that don’t often make these lists.

Among metropolitan statistical areas with a population of at least 500,000, those with the biggest annual increase in share of institutional investor purchases were Baton Rouge, La., (up 131%), San Francisco (up 92%), McAllen, Texas (up 62%), Allentown, Pa., (up 49%), and Omaha, Neb., (up 49%).

Other major metro areas with an annual increase in the share of institutional investor purchases included Dallas-Fort Worth (up 45%), Miami (up 8%), Atlanta (up 38%), Minneapolis (up 8%), Tampa (up 17%), San Antonio (up 25%), and Las Vegas (up 24%).

Major metro areas with an annual decrease in the share of institutional investor purchases included New York (down 44%), Los Angeles (down 80%), Chicago (down 41%), Washington, D.C. (down 52%) and Phoenix (down 14%).

“Institutional investors have bought up much of the affordable inventory they are traditionally interested in, which explains the decrease in institutional investor sales,” said Chris Pollinger, senior vice president of sales at First Team Real Estate, covering the Southern California market.  “We are seeing a rise in foreign buyers purchasing high-end homes, which is contributing to the rise in all-cash purchases.

“Inventory shortages as well as lending regulations favor the all-cash buyer, which explains the increase in cash sales on both a national and local level,” Pollinger added.

“There just aren’t as many listings to satisfy the demands of institutional investors in the Oklahoma market.  Listing inventory is down 50% in Oklahoma City from a year ago and down 20% in Tulsa,” said Sheldon Detrick, CEO of Prudential Detrick/Alliance Realty, covering the Oklahoma City and Tulsa, Okla. markets — both of which saw an annual decrease in the share of institutional investor purchases in the first quarter.  “So you have more investors chasing a much smaller pie, resulting in fewer institutional investor sales.”

What about where cash is king?

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: Cape Coral-Fort Myers, (73.6%), Miami (67.1%), Sarasota, (65.1%), Palm Bay, (64.1%), and Lakeland, (61.8%).

Other major metro areas with more than 50% all-cash sales included New York (57.0%), Columbia, S.C., (56.1%), Memphis (54.9%), Detroit (53.5%), Atlanta (53.2%) and Las Vegas (52.2%).

“The cash buyer segment of the Northern Nevada housing market is very strong.  More than 50% of transactions in our Reno office were cash sales.  High-end home sales are strong as well, and we typically see a higher percentage of those buyers purchase with cash,” said Craig King, COO of Chase International, covering the Lake Tahoe and Reno, Nev., markets.  “As the level of inventory dwindles in the price points sought after by investors, so do the number of institutional investor sales.  We continue to see a strong interest from investors, but the inventory to support the demand just isn’t there.”

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