Investors are feeling less like they are getting good deals on houses these days, and the trend is causing many to move their assets and their interests elsewhere. According to May’s Campbell/Inside Mortgage Finance/HousingPulse Tracking Survey, real estate investors bought fewer home purchases in May 2013 than they have in more than three years. Investor purchases fell from 22 percent in April to 20.2 percent in May, with investors crediting weakening incentive to buy “as profit margins dwindle due to rising prices”[1]. Owner-occupants accounted for 43.8 percent of home purchases in May, with 36 percent of home purchases being made by first-time buyers.

Analysts speculate that it is not just a rising population of homebuyers that is contributing to the investor “pullback,” but a combination of aggressive bids from would-be owner-occupants, rising interest rates, and a growing population of investors as well. Sales-to-list price ratios on REO, short sale, and foreclosure properties are also dropping, making profit margins for most investors relatively smaller[2]. Larger, institutional investors remain active in the markets largely due to their ability to buy in bulk and get discounts that way.

by Carole VanSickle