Despite an increase in the fourth quarter, the share of home sales to institutional investors and all-cash buyers dropped in 2014, according to RealtyTrac's U.S. Institutional Investor and Cash Sales Report.
A total of 105,278 single-family homes (about 4.2% of all sales) were sold to institutional investors (entities that purchase at least 10 properties in a calendar year) in 2014 – down 31% compared to the 153,450 homes sold to institutional investors in 2013, according to the report.
In fact, sales to institutional investors hit a four-year low in 2014.
RealtyTrac notes that overall sales of single-family homes decreased 2% between 2013 and 2014.
Institutional investor purchases represented 3.7% of all single-family home sales in the fourth quarter, up from 3.5% of sales in the third quarter but still below the 5.4% of all sales in the fourth quarter of 2013.
‘While the overall percentage of purchases by institutional investors is nothing to write home about nationwide, the true impact of these investors can be seen more clearly at the hyper-local level,’ says Daren Blomquist, vice president at RealtyTrac. ‘There were 35 ZIP codes nationwide where at least 50 single-family homes were purchased by institutional investors in the fourth quarter, with institutional investor purchases representing from 17 percent to 74 percent of all single-family home sales in those ZIP codes.’
In the past four years, cash buyers have purchased a total of 3,951,798 single-family homes and condos nationwide, led by Florida (864,659), California (453,175), Michigan (203,518), Georgia (176,408) and Arizona (170,320), according to the report.
During that same time period, institutional investors purchased a total of 528,369 single-family homes nationwide, led by Florida (78,155), California (52,802), Georgia (46,914), Arizona (35,979) and North Carolina (34,769).
Cash buyers represented 30.3% of all single-family home and condo sales in the fourth quarter, up from 28.5% in the third quarter but down from 33.9% in the fourth quarter of 2013.
Nearly 8% of cash buyers took out a subsequent mortgage after the purchase, according to RealtyTrac's analysis of nearly 1.5 million all-cash purchases of single-family homes nationwide from January 2013 through December 2014.
Metropolitan areas that saw the highest share of institutional investors, year over year, in the fourth quarter were Memphis, Tenn. (18.3%); Charlotte, N.C. (15.3%); Atlanta (11.3%); Raleigh, N.C. (10.5%); and Oklahoma City (9.3%). Among these top five markets, Atlanta and Oklahoma City saw a decrease in share from a year ago, but Memphis, Charlotte and Raleigh all saw increasing activity from institutional investors.
Other markets with an increasing share of institutional investor purchases compared to a year ago included Greensboro, N.C.; Provo and Ogden, Utah; Madison, Wis.; and Detroit.
Metropolitan markets with the highest share of cash buyers for the fourth quarter were Miami (58.1%); Sarasota-Bradenton-Venice, Fla. (54.3%); Cape Coral-Fort Myers, Fla. (53.9%); Tampa, Fla. (49.0%); and Memphis, Tenn. (48.1%). Among these top five, only Memphis saw an increase in its all-cash sales share compared to a year ago.
Other markets with an increasing all-cash sales share compared to a year ago included Cincinnati; Oklahoma City; Greensboro, N.C.; Buffalo, N.Y.; and Philadelphia.
To view the full report, click here.