Institutional Investor Buys Drop to Low Level

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IRVINE, CA—Sales to institutional investors—defined as entities that purchase at least 10 properties in a calendar year—accounted for 4.7% of all sales of single-family homes and condos in the second quarter, according to a report from RealtyTrac. The firm says this number is down from 5.3% in the previous quarter and down from 5.8% a year ago to the lowest level since the first quarter of 2012.

Among metropolitan statistical areas with a population of at least 500,000, those with the highest share of institutional-investor purchases in the second quarter were Atlanta-Sandy Springs-Marietta; Las Vegas-Paradise; Jacksonville, FL; Memphis; and Charlotte-Gastonia-Concord. Although Atlanta documented the highest share of institutional-investor sales in the second quarter, its 15.6% share was down from a 20.6% share in the first quarter and a 16.5% share in the second quarter of 2013, following nine consecutive quarters with year-over-year increases in Atlanta's institutional-investor share. The institutional-investor share of home purchases was also down from a year ago in Memphis and Charlotte, but increased from a year ago in Las Vegas and Jacksonville, bucking the national trend.

As GlobeSt.com reported earlier this week, cash purchases represented 38% of home sales nationwide in the second quarter, down from 42% in Q1, according to RealtyTrac's report. In addition, cash sales skewed higher on both ends of the home-price spectrum in Q2. According to Daren Blomquist, VP of RealtyTrac, “The flurry of purchases by institutional investors and other cash buyers that kicked off two years ago when US home prices hit bottom is finally showing signs of subsiding. Over the past 10 quarters, cash sales have accounted for 39% of all home sales on average, and institutional-investor purchases have accounted for 5.3% of all home sales on average. Prior to that, from 2001 to 2011, the average quarterly cash share was 30%, and the average quarterly institutional investor share was 2.6%.”

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