The share of home sales to institutional investors and all-cash buyers dropped to four-year lows in 2014 despite a quarterly increase in the fourth quarter, according to RealtyTrac.
A total of 105,278 single family homes were sold to institutional investors — entities that purchase at least 10 properties in a calendar year — in 2014, 4.2% of all sales and down 31% from the 153,450 institutional investor purchases in 2013 to a four-year low. Meanwhile overall sales of single family homes decreased 2% between 2013 and 2014.
In the past four years, institutional investors have purchased a total of 528,369 single family homes nationwide, led by Florida (78,155), California (52,802), Georgia (46,914), Arizona (35,979), and North Carolina (34,769).
Institutional investor purchases represented 3.7% of all single family home sales in the fourth quarter, up from 3.5% of sales in the third quarter but still below the 5.4% of all sales in the fourth quarter of 2013.
“While the overall percentage of purchases by institutional investors is nothing to write home about nationwide, the true impact of these investors can be seen more clearly at the hyperlocal level,” said Daren Blomquist, vice president at RealtyTrac. “There were 35 zip codes nationwide where at least 50 single family homes were purchased by institutional investors in the fourth quarter, with institutional investor purchases representing from 17% to 74% of all single family home sales in those zip codes.”
“With our limited land and growing population the institutional investors believe our region will outperform the U.S. market,” said Mike Pappas, CEO and president of the Keyes Company, covering the South Florida market, where institutional investors accounted for 21% of all single family purchases in zip code 33023 in Hollywood, Florida, in the fourth quarter.
“We are seeing a fair amount of deals in the area as this institutional investor money is really becoming a player,” said Wesley M. Hardin, owner/broker at RE/MAX Alliance, covering the Denver market, which saw an uptick in institutional investors in the fourth quarter. “In fact, I closed a deal this past Wednesday from a REIT back east. They sent the offer without seeing the home and closed in about 10 days. The title company told me this was their 256th purchase in the metro area in the last 12 months.”
A total of 944,892 single family homes and condos were sold to all-cash buyers in 2014, down 13% from the 1,083,169 all-cash sales in 2013 and representing 30.9% of all sales during the year — a four-year low. Overall sales of single family homes and condos combined decreased 2% in 2014 compared to 2013.
In the past four years cash buyers have purchased a total of 3,951,798 single family homes and condos nationwide, led by Florida (864,659), California (453,175), Michigan (203,518), Georgia (176,408), and Arizona (170,320).
Cash buyers represented 30.3 of all single family home and condo sales in the fourth quarter, up from 28.5% of all sales in the third quarter but still below the 33.9% of all sales in the fourth quarter of 2013.
“Cash buyers are still king in Seattle; made up primarily by investors at the low end and international home buyers at the high end,” said OB Jacobi, president of Windermere Real Estate, covering the Seattle market,” said OB Jacobi, president of Windermere Real Estate, covering the Seattle market, where the share of cash sales and institutional investor purchases increased from the third to fourth quarter. “In Seattle, we are beginning to see institutional investors sell off their properties because of the significant equity they’ve been able to build over the past few years. On the buying side, there has been a slight shift to smaller, local investors who historically need less upside in a deal to satisfy their requirements.”
Nearly 8% of U.S. cash buyers took out a subsequent mortgage after the purchase, according to a RealtyTrac analysis of nearly 1.5 million all-cash purchases of single family homes nationwide from January 2013 through December 2014.
On average the original cash purchase prices were 93% of the purchased property’s full market value, and the subsequent mortgage was recorded an average of 202 days — nearly seven months — after the sale.
The county with the highest percentage of cash sales with a subsequent mortgage was San Francisco County, California, where 24% of cash buyers took out a subsequent mortgage, followed by Denver County, Colorado (21%), Marin County, California (20%), and San Mateo and Santa Clara County, both in California and both with 19% of cash purchases with subsequent financing.