Institutional Investor Purchases Driving Uptick in Residential Sales

The housing market continues to favor investors, particularly deep-pocketed institutional investors, who are buying distressed and nondistressed assets with cash.

Residential properties including single-family homes, condominiums and townhomes sold at an estimated annual pace of 5.6 million in September, according to RealtyTrac, which is up 2% on a monthly basis and 14% higher than a year ago.

Institutional investors who purchased 10 or more properties in the last 12 months accounted for 14% of all sales in September. This is up from the 9% mark experienced September 2012 as well as last month.

The September 2013 percentage is the highest for institutional investor purchases of any month since the Irvine, Calif.-based firm began tracking this at the beginning of 2011.

Among metropolitan areas with a population of at least 1 million people, institutional investors bought the most housing units in Atlanta (29%), Las Vegas (27%), St. Louis (25%), Jacksonville (25%), Charlotte (17%), Memphis (16%), Dallas (15%) and San Antonio (15%).

“While the institutional investors are pulling back their purchases in many of the higher-priced markets—places like San Francisco, Washington, D.C., New York, Seattle and Sacramento—they are continuing to ramp up purchases in markets where median prices are still below $200,000,” said Daren Blomquist, vice president at RealtyTrac.

Meanwhile, all-cash acquisitions reached its highest level since March 2012 consisting of 49% of the total residential sales that occurred in September. Cash sales accounted for more than 60% of residential purchases in the Florida cities of Miami, Tampa and Jacksonville. Other notable markets where cash sales represented at least 50% of all transactions were Las Vegas, Orlando, Atlanta, Cleveland and Memphis.

The report also revealed that short sales made up 15% of residential sales nationwide, while REO transactions represented 10% of the total figure.

The national median sales prices of all residential housing units rose to $174,000, a 1% increase from August and up 6% from a year ago, while a property in foreclosure or bank-owned sold for a median value of $112,000.

The biggest annual increases in median prices were seen in California which was up 30%, Michigan had a 25% jump, Nevada rose by 23%, while both Georgia and Arizona experienced a 20% uptick.

“Distressed sales remain persistently high, particularly short sales,” said Daren Blomquist, vice president at RealtyTrac. “Markets with the biggest increases in short sales tend to be those where either foreclosure starts or scheduled foreclosure auctions have rebounded in the last 18 months—translating into more motivated short sellers—or those with a still-high percentage of underwater homeowners with negative equity.”