Institutional Investors Increase Their Home Buying Activity by 50%

By  for Profit Confidential
I may be the only one saying it: the rise in the U.S. housing market doesn’t look sustainable.

One of the most critical components of the housing market I follow is first-time home buyers. Why? As I have said many times in these pages, they are the ones who promote economic growth by increasing consumer spending after they make a home purchase; they buy furniture, appliances, audio/visual electronics, and more to fill the homes they buy.

Looking at the existing U.S. home sales for February, I see first-time home buyers accounted for only 30% of purchases in the housing market—that’s 6.25% lower than the number of first-time home buyers one year ago, in February of 2012. (Source: National Association of Realtors, March 21, 2013.) Until first-time home buyers pour into the housing market, I don’t expect it to go much further in terms of price increases.

With that said, the question arises: who is actually buying the homes and causing home prices to start increasing? According to the National Association of Realtors (NAR), the national median home price for all housing increased 11.6% to $173,600 in February of 2013 from last February.

Home prices have increased for 12 consecutive months now. They haven’t been big increases, but the last time the U.S. housing market witnessed this many consecutive months of price increases was from June 2005 to May 2006.

The reality is that it’s the investors who are buying up homes right across America.

While the number of first-time home buyers declined in February, investors accounted for 22% of all the existing homes purchases in the U.S. housing market. In January, they accounted for only 19%.

According to a report by JPMorgan Chase & Co. (NYSE/JPM), institutional investors are looking to invest $10.0 billion in the housing market in an effort to rent the properties out for income. (Source: USA Today, January 22, 2013.)

The recent M… Read More

Michael Lombardi