This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Buyers Driving Housing Recovery, Not Investors

NEW YORK ( TheStreet) -- Investors may have kick-started the housing recovery, buyers are truly driving the market, research shows.

Recent reports point to strength in the non-distressed or conventional sales market, which is dominated by current homeowners and first-time home buyers.

According to the Campbell/Inside Mortgage Finance Survey released last week, investors accounted for just 21.8% of home sales in March. Investors accounted for only 13% of sales of non-distressed properties, the largest segment of the market. Current homeowners had a 50% market share and first-time homebuyers a 37% share of the non-distressed housing market.

Bank of America Merrill Lynch analyst Michelle Meyer noted in a report last week that while investors buy a disproportionate share of foreclosed homes -- making them relevant in markets with high levels of foreclosures -- primary homebuyers are still the largest share of the market.

Significantly, she notes that while a third of the sales are "cash" purchases, not all cash-buyers are investors. "Over 20% of buyers who are looking to relocate (turnover) and 60% of second home buyers use only cash," according to Meyer."

"As credit conditions gradually ease, which we anticipate, the housing market will open to a wider range of buyers, particularly first-time owners," she wrote.

Former Morgan Stanley analyst Oliver Chang, who now runs his own single family rental business Sylvan Road Capital, studied the Atlanta housing market and was surprised to find that homebuyers and not investors are driving the recovery in both sales and prices.

For all the stories about how investors are crowding out home buyers, "owner-occupied buyers are paying the highest prices for non-distressed properties by a wide margin, over the highest investor prices even after taking renovation costs into account," Chang's study revealed. The analysis adjusted for the mix of homes.

Clearly buyers who are in it for the long haul are more willing to pay a higher price for a home than investors who are looking to profit from the housing recovery.

All the studies are aimed at dispelling one concern in this housing recovery -- that big investors hungry for yield such as Blackstone (BX - Get Report) and Colony Capital (CLNY - Get Report) are driving up home prices, but will disappear from the market once the returns diminish. For more on this subject, see Real Estate Investor Math Changes As Rents Flatten.

Given investors' relatively low share of the market, this fear may be overblown.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
IYR $78.54 1.50%
XHB $33.40 -0.18%
BX $26.48 -2.10%
CLNY $17.40 -0.34%
AAPL $94.34 -0.88%


Chart of I:DJI
DOW 17,651.16 -99.75 -0.56%
S&P 500 2,048.79 -14.58 -0.71%
NASDAQ 4,721.7940 -41.43 -0.87%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs