Major RE investors boost sale prices, lower rents NAPLES – March 11, 2014 – The big guys who scoop up homes in bulk haven’t made up a big percentage of the housing market during the past few years. But their influence on prices and rents has been oversized, particularly in Southwest Florida. From 2011 to 2013, institutional investors purchased more than 850,000 properties nationwide, representing slightly more than 6 percent of all sales, according to Irvine, Calif.-based research firm RealtyTrac. But the percentage was higher in Collier County – nearly 9 percent – and nearly three times higher in Lee, or 17 percent. The fact that Southwest Florida was one of the hardest-hit areas in the nation during the recession made it an early target of institutional investors, defined as entities that have purchased more than 10 residential properties in a calendar year. But it remained attractive during the recovery years of 2011 to 2013, partly because Florida is a judicial state when it comes to foreclosures, making the release of properties to buyers slower than it would be in nonjudicial states, said Daren Blomquist, RealtyTrac vice president. Another is that homes cost much less in Florida than they do in some other states that struggled during the recession, like California and New York. “Many are still in the attractive sweet spot to investors, which is under $200,000,” Blomquist said. Although institutional investors tend to cherry-pick the biggest bargains, because they buy in bulk their activity generally has had a positive effect on the markets where they’ve focused their activities. Nationwide, RealtyTrac’s study showed that the median price of properties in 1,264 counties where investor activity could be tracked rose 14 percent during the three-year period. But in places where the institutional investors accounted for more than 10 percent of all sales, home prices increased an average of 18 percent. In Collier County, median prices rose 38 percent to $220,000 from 2011 to 2013, while in Lee they jumped 47 percent to $135,550. Meanwhile, institutional purchases have had the effect of dampening rents, RealtyTrac said. Using statistics on fair market rents from the U.S. Department of Housing and Urban Development, RealtyTrac found that nationwide where institutional investors were active, rents on three-bedroom homes increased an average of 7 percent from 2011 to 2013. But where institutional investors accounted for 10 percent or more of purchases, rents went up more than 5 percent. The effect was even more pronounced in Southwest Florida: Over the three-year period, rents actually decreased by 7 percent in Collier County, and 8 percent in Lee, according to RealtyTrac. Blomquist said that’s because institutional investors were putting foreclosed homes that may not have been rented before into the rental market, increasing supply. But not everyone agrees that rents locally are falling. Arlene Fishman, a rental broker with Downing Frye Realty in Naples, said in her experience, local rents are on the rise because so many homes that were formerly rented have been sold in the hot market. “It’s happening across the board,” she said. “There’s very little available.” Blomquist countered that lower rents may not be reflected in what real estate agents experience, because some institutional investors turn to property managers or in-house staff to handle their rentals. While institutional investors are still active in Southwest Florida, some real estate agents think smaller investors may play a larger role in the near future. Naples real estate agent Nan Goebel said she’s seen more mom-and-pop investors of late, particularly as the percentage of deeply discounted distressed properties in the market has dropped. Without the need to please shareholders with quick, lavish profits, individual investors are more willing than institutions to fix up properties, hold them for a long period and accept lower rents. “They’re seeing inventory levels go down and prices go up, so they’re jumping into the market to ride it back up,” she said. Copyright © 2014 the Naples Daily News (Naples, Fla.). Distributed by MCT Information Services.
Posted on: Thu, 13 Mar 2014 13:16:38 +0000
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