RealtyTrac has published a new ‘heat map’ showing where real estate investor activity is ‘hottest’ in the U.S.
According to the property data and analytics firm, institutional investors – defined as individuals or entities that purchase at least 10 residential properties in a calendar year – in 2011 purchased 219,000 residential properties nationwide, representing 5.12% of all residential sales. In 2012, that increased to about 259,000, or about 5.82% of all sales – and in 2013, it increased to about 354,000, or about 7.4% of all sales.
Overall, institutional investor-share of residential sales increased by about 44% from 2011 to 2013.
Over the last three years, institutional investors have purchased more than 850,000 residential properties, representing 6.14% of all sales, according to RealtyTrac.
As the heat map shows, the level of investor activity can vary wildly from area to area. That's because investors are looking to buy properties where economic and market factors are favorable. While some investors are buying homes to fix them up and flip them, others are pushing into the rental market and thus are seeking properties in areas where rental demand is high. Another reason why such investments tend to be "clustered" is simple logistics: Having properties located in close proximity makes it simpler and more economical to maintain them in the event they are to become rentals.
RealtyTrac's data shows that in areas where institutional investor activity has been strong, home prices are artificially inflated. In markets where institutional investors accounted for more than 20% of all sales, home prices have appreciated an average of 31% over the last two years. RealtyTrac cautioned, however, that it had measured this factor in only 14 counties, accounting for less than 1% of the U.S. population.
On the flip side of that, investor activity has had the effect of driving down rents in areas where it has exceeded 20% of all sales. Fair market rents on three-bedroom homes for all 1,264 counties increased an average of 7% between 2011 and 2013, but only increased 6% in counties where institutional investors accounted for 20% or more of purchases, according to the firm. What's more, rents increased by only 5% in counties where institutional investors accounted for 10% or more of purchases.
To check out the ‘heat map,’ click here.