(5/30/2011) - Investors have the moxie, the moolah, and the mindset to
muscle in on first time homebuyers and they make no bones about their plans
to do so, all while making a killing in the process.
A new Move.com Investor
Survey released last week, says by three-to-one, investors will be more
active in local markets, compared to typical homebuyers, in the next two
years.
The national survey says investors are bullish about vigorously competing with
traditional first-time homebuyers because they know the time is right and
they know they've got the edge.
Move found 65.5 percent of investors surveyed said they expect first-time
homebuyer problems to work in their favor -- 18.5 percent say they'll be
cash-only buyers, and 80.5 percent expect to wrest cash discounts from
sellers.
As revealed in another recent study, these investors are more like saints than sinners and
are coming to market to stick around, rather than flip out.
Picking up the slack left by first-time and rank-and-file buyers, investor action, building now for years,
should benefit the sluggish housing market by shrinking the over-supply of
distressed and other homes that has pushed prices down to levels not seen in
more than a decade.
New investors wear halos
Move says, contrary to the speculative flippers of an era gone by, 50
percent of today's real estate investors plan to hold onto properties for
five years or more. Only 11 percent expect to sell within 12 months of
purchase. Two-thirds (67.5 percent) say they're investing for the long
term.
Fifty-nine percent told Move they're new to the investing game, with 33.5 percent
considering their first investment purchase and 8.5 percent in the process
of buying and selling their first investment property.
Another 17 percent said they just completed their first transaction and
plan to make more. Only 36.5 percent have experience in more than one
property transaction.
Newbies, maybe, but they appear to know bottom when they see it.
A recent Pew study found that 81 percent of adults agree that
buying a home is the best long-term investment a person can make.
NAR's 2011 Profile of International Home Buying Activity said total
residential international sales in the U.S. for the past year ending March
2011 equaled $82 billion, up from $66 billion in 2010.
Total international sales were split evenly between non-resident
foreigners and recent immigrants, while combined total domestic and
international existing-home sales in the U.S. were $1.07 trillion.
"This data suggests today's climate is hot for investing and is
attracting a lot of new people that don't fit the stereotypical deal-driven
flippers that buy and sell properties quickly," said Move, Inc. CEO, Steve
Berkowitz.
"They're mostly entrepreneurial individuals that will make vital
contributions to local communities by investing their own money and sweat
equity to improve and maintain properties. These personal sacrifices made
over the long run will help improve housing stocks, home values, property
tax bases, and thousands of local communities," Berkowitz said.
Investors expect decent returns
Forty-eight percent expect a profit of 20 percent or more from their
property investments, a 4 percent annual rate of return over five years -- a
rate of return that hasn't been seen for years. Another 40 percent expect a
profit of 10 percent, and only 6.5 percent expecting a five percent or less
return on investment.
While investors appear poised to outnumber traditional homebuyers, 27
percent will buy a primary residence/investment as a first-time buyer.
Forty-nine percent expect to live in their investment property until it's
sold or turned into a rental property.
More than half (56.5 percent) will put their investments to work right away as rental properties, and
28 percent plan to purchase vacation property that they'll
eventually sell.
"The number of renter households has swelled significantly during the
recession as homeowners facing job loss and foreclosure have been pushed
into the rental market. The demand for rental units is forecast to rise by
12 percent by the end of the decade, making low- to moderately-priced rental
units appear to be a good investment on both a valuation and a cash flow
basis," said Nancy Osborne, chief operating officer of Erate.com, a Santa Clara,
CA-based financial information publisher and interest rate tracker.
The Move Investor survey also found 30 percent of real estate investors
are interested in buying retirement property as an investment.
"While today's market is tough for some, it's also motivating millions to
take an unconventional approach and creatively search for new ways of
entering the housing market," Berkowitz said.
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