This Day On The Street
Continue to site right-arrow
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
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Buyers Driving Housing Recovery, Not Investors

Stocks in this article: BX CLNY XHB IYR

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) and Colony Capital (CLNY) 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

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

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
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, 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
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 18,030.21 +6.04 0.03%
S&P 500 2,081.88 -0.29 -0.01%
NASDAQ 4,773.4720 +8.0480 0.17%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs