Low Prices, Strong Rental Demand Attract More Investors

According to the November 30, 2011 Housing Pulse/Campbell Surveys out of Washington D.C.:

Investor purchases hit 22.3% of closed transactions for the month of October, up from just 19.6% as recently as July. For the past three months, investor participation has exceeded 20%, continuing a long-term trend of increased investor interest in the housing market.

A combination of low home prices and growing demand for rental units make purchasing damaged Real Estate Owned (REO), fixing up the properties, and then collecting monthly rents, an attractive financial play. In October, average prices for damaged REO hit $101,100, the lowest price recorded in two years. In contrast, home prices for non-distressed residential properties averaged $266,700 in October.

One factor pushing down average home prices overall is the high proportion of distressed properties found in today’s housing market. The total proportion of distressed home sales, as represented by the

HousingPulse Distressed Property Index (DPI), rose a full 4 percentage points to 48.4% in October, up from to 44.4% in September.

Meanwhile, the gap between the supply of distressed properties and their absorption by first-time homebuyers widened to 13.7 percentage points in October, from a reading of 8.8 percentage points in September. This shows that first-time homebuyers have become less active in the distressed property housing market.

Housing Trends Update

Housing Trends Update is published monthly and is available only to real estate agents who are

part of the Campbell/Inside Mortgage Finance HousingPulse survey panel