Investors poised to further stimulate residential real estate market

by Broderick Perkins

(9/24/2012) - A new study contradicts reports that real estate investors are beginning to leave the market. To the contrary, investors' pockets are far from empty and there's a good chance you ain't seen nothing yet.

In the next 12 months, 65 percent of active real estate investors plan to buy as many as or more properties than they did in the past year and that should have quite an impact on the housing market, according to an ORC International survey commissioned by BiggerPockets.com and Memphis Invest.

That percentage represents 4.5 million investors who actually out number the under 2.5 million homes on the market each month.

What's more, the survey found that 39 percent of active investors plan to buy more properties than they did in the past year, while 26 percent plan to buy at least as properties next year, as they did in the last year.

Reports of fewer investors likely reflect a temporary condition.

Investors, who account for most cash sales, purchased 18 percent of homes in August 2012, down from 22 percent last August. All-cash sales were also down from 29 percent last August to 27 percent August 2012, according to the National Association of Realtors, but still account for nearly a third of the market.

Investors are likely taking a breather to take stock of what they've already snagged. Investors are well aware prices are rising and interest rates are at all-time lows and are likely more concerned about rising prices than interest rates, given recent Federal Reserve action will keep rates low for years to come.

While there are 4.5 million repeat-buy investors, the national inventory of existing homes at the end of August was only 2.47 million, 18.2 percent below the number from a year ago, according to NAR.

"Though housing markets are changing across the nation, investors are still seeing great opportunities. Hundreds of thousands of foreclosures and short sales are coming to market and rents are continuing to improve in most markets, creating a positive environment for the nation's 28.1 million residential real estate investors," said Joshua Dorkin, founder and CEO of BiggerPockets.com.

Residential real estate investors' purchases also help boost prices and stimulate the economy. Investors spend $9.2 billion a year to repair and rehabilitate housing, to prepare it for renters or flipping - more than that's four times as much as the federal Neighborhood Stabilization Program spends.

Investors spend a median of $7,500 to update properties, with 20 percent spending $10,000 to $30,000 on their next property and 16 percent planning to spend more than $30,000.

The money not only removes blight and improves neighborhoods by removing distressed properties that sit for months, it helps drive the economy by opening job opportunities for carpenters, electricians, painters, plumbers, flooring companies, laborers and more.

According to the National Association of Realtors for every two homes sold, one job is created and every home purchased pumps up to $60,000 into the economy.

"They will certainly continue to be major players in the nation's housing economy for the foreseeable future. We're talking about a group of Americans that is about the same in number as the number of Americans who own Roth IRAs (28.5 million) or the total number of money market fund shareholders (29 million). They have significant buying power," said Dorkin.

However, when investors become speculatorsÃÂ well, that's another story to watch.