Investors Pile Into Housing, This Time as Landlords

by 25 Mar 2013

(WSJ) -- Jeff Pintar had buyer's remorse as he purchased 12 foreclosed homes in five Southern California counties on a single day. His regret: that he didn't buy more homes a year earlier.

"Things have turned around faster than anyone anticipated," said Mr. Pintar, who first began buying properties here four years ago and now owns or manages 1,700 homes, which he rents out for between $1,000 and $3,800 a month. Here in Orange County, nearly every home listed for less than $400,000 "is being pursued by institutional investor capital," he said.

U.S. housing recoveries almost always have been ignited by rising demand from families and individuals looking for a place to live. This recovery is different. Investors—including some big Wall Street players—are leading the way, say industry executives and analysts. Their role is noteworthy given that flippers and speculators were blamed for helping to inflate the housing bubble of the past decade.

Today's investors are mostly buying with the intention of holding on to the homes and renting them out. As they pile into the housing market, they have set off a chain reaction that has stabilized prices and changed market psychology, industry executives and analysts say. Fear of buying homes when prices are dropping has been replaced by the fear of missing out on cheap homes.

"Whether they knew it or not, investors helped set a floor. They warmed up the market, and it brought buyers back," said Lanny Baker, chief executive of real-estate brokerage ZipRealty.

Investors have always played a role in the housing market, but their presence was often small. Currently, cash buyers—largely investors—make up about 32% of sales nationally, according to the National Association of Realtors. In Southern California, a favorite target for investors, absentee buyers accounted for 31.4% of purchases last month, up from an average of less than 17% between 2000 and 2010, according to DataQuick MDA, a real-estate research firm.

While some firms have focused only on Sunbelt markets with newer housing stock, others are branching out. American Residential Properties Inc., which began amassing hundreds of homes in Phoenix four years ago, earlier this month bought 93 homes in Chicago's southern suburbs, bringing its total there to around 300. On Friday, the company said it planned to raise $300 million in an initial public offering, according to a regulatory filing.

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