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Survey Finds Investors Taking Advantage of a 20-Year High in Housing Affordability
May 27, 2011

According to a new national survey of real estate investors conducted by Move Inc., real estate investors will outnumber the typical homebuyer three to one in their local markets in the next 24 months, and 69 percent of investors say it'll be easier to find properties in the near future. The Move Investor survey also suggests local markets will be heating up with renewed investor interest and activity. Nationwide housing affordability during the first quarter of 2011 rose to its highest level in the more than 20 years it has been measured, according to the recent National Association of Home Builders/Wells Fargo Housing Opportunity Index (HOI) data. The data indicated that 74.6 percent of all new and existing homes sold in the first quarter of 2011 were affordable to families earning the national median income of $64,400. Compared to 2010, 62 percent of investors are paying more attention to home values in their local markets, while only 43.5 percent say it will be harder to find bargains and 41.5 percent expect it'll be easier to sell their properties in the next six months. Twenty-two percent of investors are bullish and expect prices to rise in the next six to 12 months, and 53.5 percent expect prices to remain relatively the same, while 23 percent expect that prices will fall in the next six to 12 months. The Move Investor survey also shows investors are positioned to compete vigorously with traditional first-time homebuyers for hot deals. Approximately 65.5 percent of investors said they expect the problems first-time buyers are having in getting mortgages will make it easier for them to compete for properties. One in five investors, or 18.5 percent of those surveyed, say they'll be cash-only buyers, a strategy that's out of reach for most first-time buyers, while 80.5 percent expect cash discounts from sellers. Contrary to property flipping tactics used by investors, 50 percent of today's real estate investors plan to hold their properties for five-plus years. Only 11 percent expect to sell within 12 months of purchase, while 67.5 percent say they're investing for the long-term. Fifty-nine percent told Move Inc. that they are new to real estate investing, with 33.5 percent considering their first investment purchase and 8.5 percent in the process of buying and selling their first investment property. Another 17 percent said they just completed their first transaction and plan to make more. Only 36.5 percent have experience in more than one property transaction. When it comes to repairs and maintenance, 56.5 percent of investors say the repair and maintenance of investment property has not been difficult. Moving forward, 42 percent plan to invest their own time and energy to improve, repair and maintain their properties. The remainder said they'll hire a contractor for repairs (29.5 percent) or purchase move-in-ready properties (28 percent). Around 65.7 percent don't expect repair costs to exceed 20 percent of the property's purchase price. "This data suggests today's climate is hot for investing and is attracting a lot of new people that don't fit the stereotypical deal-driven flippers that buy and sell properties quickly," said Move Inc. Chief Executive Officer Steve Berkowitz. "They're mostly entrepreneurial individuals that will make vital contributions to local communities by investing their own money and sweat equity to improve and maintain properties. These personal sacrifices made over the long run will help improve housing stocks, home values, property tax bases and thousands of local communities." While cash is king in many circles, 75.5 percent plan to combine cash and credit to purchase properties as they build their real estate portfolio. In fact, 59.5 percent plan to put less than half down on their next property purchase and they'll finance the rest. Those planning to use more than 50 percent cash and finance the remainder, account for 16 percent of today's investors. Investors told Move Inc. that the second most difficult challenge has been in finding financing (57 percent). Based on the investments they're making in today's environment, real estate investors clearly expect high yield returns. Approximately 48 percent expect a profit of 20 percent or more from their property investments, a four percent annual rate of return over five years. Another 40 percent expect a profit of 10 percent, and only 6.5 percent expecting a five percent or less return on investment. Fifty percent of today's real estate investors plan to hold their properties for five plus years. While the survey shows investors will outnumber traditional homebuyers three to one in the next two years, 27 percent said they'll buy a primary residence as a first-time buyer as their first real estate investment. Nearly half (49 percent) plan to live in their investment property until it's sold or turned into a rental property. Slightly more than half (56.5 percent) will put their investments to work as rental properties, and 28 percent plan to purchase vacation property that they'll eventually sell. The Move Investor survey also found 30 percent of real estate investors are interested in buying retirement property as an investment. "The survey suggests some first-time buyers may be looking at investing as a strategy to becoming homeowners," said Berkowitz. "While today's market is tough for some, it's also motivating millions to take an unconventional approach and creatively search for new ways of entering the housing market. This data also suggests the dream of homeownership is alive for millions that are keeping their eye on the future and using their initial home as the first in a series of what may become many investments in real estate. Investment opportunities—perhaps next door or down the street—will continue to knock at the door for many local investors with the vision, faith and interest in their local markets."
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