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RealtyTrac has released its Q4 and Year-End 2014 U.S. Institutional Investor & Cash Sales Report, which shows that 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. 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 percent of all sales and down 31 percent from the 153,450 institutional investor purchases in 2013 to a four-year low. Meanwhile overall sales of single family homes decreased 2 percent 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 percent of all single family home sales in the fourth quarter, up from 3.5 percent of sales in the third quarter but still below the 5.4 percent 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 percent to 74 percent 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 percent of all single family purchases in zip code 33023 in Hollywood, Florida, in the fourth quarter.
A total of 944,892 single family homes and condos were sold to all-cash buyers in 2014, down 13 percent from the 1,083,169 all-cash sales in 2013 and representing 30.9 percent of all sales during the year—a four-year low. Overall sales of single family homes and condos combined decreased 2 percent 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 percent of all sales in the third quarter but still below the 33.9 percent 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 eight percent 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 percent 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, Calif., where 24 percent of cash buyers took out a subsequent mortgage, followed by Denver County, Colo. (21 percent), Marin County, Calif. (20 percent), and San Mateo and Santa Clara County, both in California and both with 19 percent of cash purchases with subsequent financing.
Among metropolitan statistical areas with a population of at least 500,000, Memphis, Tenn. posted the highest share of institutional investor purchases of single family homes in the fourth quarter of 2014—18.3 percent—followed by Charlotte, North Carolina (15.3 percent), Atlanta (11.3 percent), Raleigh, N.C. (10.5 percent) and Oklahoma City (9.3 percent). Among these top five markets, Atlanta and Oklahoma City saw a decrease in share from a year ago, but Memphis, Charlotte and Raleigh all saw increasing activity from institutional investors. Other markets with an increasing share of institutional investor purchases compared to a year ago included Greensboro, North Carolina, Provo and Ogden in Utah, Madison, Wisconsin, and Detroit.