Investment Home Sales in 2012

The American desire to invest in real estate is alive and well!

Investment purchases of residential real estate remained elevated for a second consecutive year, according to the National Association of Realtors (NAR)’s 2013 Investment and Vacation Home Buyers Survey, covering existing- and new-home transactions in 2012.

NAR Chief Economist Lawrence Yun noted an ongoing investor presence:

“Investors have been very active in the market over the past two years, attracted mostly by discounted foreclosures that could be quickly turned into profitable rentals. With rising prices and limited inventory, notably in the low price ranges, investors are likely to step back in coming years.”

Here are the key findings from the report:

Raw Numbers

• Investment home sales declined 2.1 percent to 1.21 million from 1.23 million in 2011. These sales had been well under a million during the market downturn
• Investment sales accounted for 24% of all transactions in 2012, down from 27% in 2011, marking the second highest share since 2005
• 47% of investment homes purchased in 2012 were distressed homes

Buyer Profile

• Investment-home buyers in 2012 had a median age of 45
• Earned $85,700
• 35% of investment buyers purchased more than one property
• 47% of investment buyers said they were likely to purchase another investment property within two years

Reasons for Purchasing

• 55% of investment buyers said they purchased for rental income
• 30% wanted to diversify their investments or saw a good investment opportunity
• 20% wanted to use the home for vacations or as a family retreat
• 16% purchased the property for a family member, friend or relative to use, often for a son or daughter to use while attending school

Flipping

Property flipping modestly increased in in 2012 but was different than past practices. Yun explained:

“This isn’t flipping in the sense of what took place during the housing boom. Rather, investors generally are renovating and improving properties before placing them back on the market to resell at a profit.”

• Investment buyers plan to hold the property for a median of 8 years
• 6% of homes purchased by investment buyers last year have already been resold, up from 5 years in 2011
• 8% are planned to be sold within a year, the same as 2011

Location

• Investors bought a home that was relatively close to their primary residence – a median distance of 21 miles, although 29% were more than 100 miles away
• 36% of investment property purchases last year were in the South
• 28% in the West
• 20% in the Northeast
• 16% in the Midwest

Financing

• The median investment-home price was $115,000 in 2012, up 15% from $100,000 in 2011
• The median down payment for investment home buyers was 27 percent, the same as in 2011
• All-cash purchases remain common in the investment-home market. Half of investment buyers paid cash in 2012