NAR survey: Real estate investment sales rose in 2015, buyers optimistic
By Kerry Curry, Contributing Writer
Residential real estate investment sales in 2015 rose 7 percent to an estimated 1.09 million from 1.02 million in 2014, according to the National Association of Realtor’s (NAR) 2016 Vacation and Investment Home survey. The rise comes despite a smaller share of distressed property on the market.
The survey also showed that real estate investors remain optimistic about the housing market and the opportunities they have to purchase properties, even with constrained inventory and rising prices.
The overall proportion of investment buyers in the market in 2015 remained steady at 19 percent last year, compared to 2014, according to the report. In comparison, the share of owner-occupant purchasers rose to 65 percent from 60 percent, while the vacation homebuyers’ share of the housing market dropped to 16 percent from 21 percent.
Investment buyers said they feel good about the future, with 29 percent saying they were very likely to buy another investment property in the next two years. NAR said 20 percent of vacation buyers and 15 percent of primary-home buyers also said they were very likely to buy an investment property in the next two years.
Rental income main reason for buying
Of investment property buyers, 42 percent said they bought a single-family residential property to generate rental income, 16 percent said they bought because of low prices and a good deal, and 14 percent bought for price appreciation.
Depressed purchases decline and prices rise
The share of investment buyers who bought a distressed property such as a short sale or a foreclosure declined to 38 percent last year from 44 percent in 2014 as the availability of distressed property declined.
Single-family property prices soared in 2015, with the median price of investment properties reaching $143,500, up 15.3 percent from $124,500 in 2014.
“Despite a smaller share of distressed properties coming onto the market, investment purchases reversed course in 2015 after declining for four straight years,” said Lawrence Yun, NAR chief economist. “Steadily increasing home prices and strong rental demand appear to be giving more individual investors assurance that purchasing real estate will diversify their portfolios and generate additional income if they decide to rent out the home.”
NAR said 39 percent of investment and vacation buyers paid with cash, down from 41 percent in 2014. For those investors financing a purchase, 44 percent financed less than 70 percent of their purchase.
Investors favor the suburbs and properties close to home
Real estate investors preferred the suburbs over urban areas, with 41 percent buying in the suburbs and 29 percent buying in an urban or central city location, according to the report. The median size for an investment property purchased last year was 1,600 square feet, smaller than owner-occupant homes, whose median size was 2,000 square feet.
Investors also stayed relatively close to home with their purchases. The typical investment property was about 22 miles from a real estate investor’s primary residence. Investors expect to own their investment properties for five years, a statistic that was unchanged from 2014.
NAR surveyed a nationally representative sample of 2,053 homebuyers in March who had purchased a home during 2015. It broke down the share of homes by primary residences, vacation homes or investment properties. The survey excludes institutional buyers.
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