Small Investors Gaining Residential Share

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IRVINE, CA—As the share of homes sold to owner-occupants drops to a new low in the Q1, smaller investors are picking up the slack and institutional investors are decreasing, according to a report from RealtyTrac. The report shows that owner-occupant buyers accounted for 63.2% of all residential single-family home and condo sales in the first quarter of 2015, down from 65.8% in the previous quarter and 68.6% a year ago to the lowest quarterly level going back to the first quarter of 2011, the earliest quarter with data available.

Meanwhile, non-owner-occupant buyers, which RealtyTrac defines as any buyer who purchased a property but has their property-tax bill mailed somewhere else—reached a new high of 36.8% in the first quarter of 2015, the highest level since the first quarter of 2011. In the universe of non-owner-occupied purchases, 44.7% were to all-cash buyers, down from 61% a year ago to the lowest quarterly level since the first quarter of 2011.

According to Daren Blomquist, VP of RealtyTrac, “The first-quarter sales data broken down by owner-occupancy status suggest two important trends in the housing market. First, investor activity continues to represent a disproportionately high share of all home sales activity in this housing recovery, but unlike the past three years, the large institutional investors are backing out while the smaller, mid-tier and mom-and-pop investors are remaining active. The second trend is that a growing number of investors are not buying all-cash, but instead are taking advantage of the broader set of financing options now available to them, thanks to a new crop of nationwide companies that have emerged offering financing specifically for investment properties.”

Blomquist tells GlobeSt.com, “Most of the smaller investors are opting for the hold-and-rent strategy, following the lead of the big institutional investors over the past three years. Flipping continues to decline and is more the realm of the full-time investor. Many of these smaller investors are passive investors who have a day job and just want to put their money to work in an investment that gets better returns than many investment vehicles available in the market today given the low interest rates.”

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