Institutional Investors Buying Traditional Sales

Mike Orr of ASU published in his

The popular impression is that institutional investors buy their homes in bulk from a bank’s foreclosure inventory or at trustee sale. The reality is very different. If we examine all of Blackstone’s purchases since they first hit the Maricopa County area in April 2012, the vast majority were purchased one at a time and they have a variety of sources:
Normal sales – 1,558
Trustee sales – 1,115
From other investors (wholesale and flips) – 597
Short sales & pre-foreclosures – 466
REOs – 172
HUD sale – 1

Note how insignificant the REO purchases were. They were pretty active at the trustee auctions, but the biggest percentage came from the MLS just like normal folks.
Source: Cromford Daily Observation

My Analysis

There’s a few take points to consider here.

This is why it’s been difficult for buyers. Especially in the lower price ranges, where investors have concentrated. Investment groups can offer cash and fast closings.

A second point this illustrates is one I have been talking to buyers about for some time. Don’t fall in love with the idea of buying a lender owned home or short sale. I discussed this in September 2012 (I want a Deal!)

The institutional money clearly found that there wasn’t enough supply of distressed properties to meet their demands. For them the bet was bigger. It wasn’t so much about finding a home that was at a discount to market because it was distressed. They decided to be on the entire market recovering and creating gains for their clients. That way they were comfortable buying 1,000’s of traditional sales as well.

For The Future

That’s almost 3,000 homes Blackstone have made unavailable to buyers in their price range, which seems to be under $200,000. These buyers will find a way to get on to the property ladder. It’s still a big goal for most people. Increased demand will drift into slightly higher price points. This trickle up effect will help get prices moving upwards in higher price brackets.

 

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