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Hungry Housing Investors Turn to Heartland

NEW YORK (TheStreet) -- Institutional investors who've been snapping up homes in Las Vegas, South Florida and other rebounding housing markets have begun branching out to Columbus, Knoxville and other locales well off the beaten path, market watcher RealtyTrac says.

"Institutional buyers have burned through the available inventory of property in the 'first wave' of distressed markets that they invested in, and now they're turning their eyes to other places," RealtyTrac Vice President Daren Blomquist says. "They pretty much have insatiable appetites."

Blackstone Group and other private-equity and hedge-fund firms have been pouring billions of dollars into the housing market in recent years, buying distressed houses by the thousands at low prices and turning properties into rentals.

The big players typically offer all-cash deals at a time some areas still have too few buyers, especially those who can qualify for mortgages.

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Blomquist says institutional investors initially focused on Miami, Phoenix and some of the other cities hardest hit by the housing bust, but have started to look elsewhere in recent months.

He says that's partly because institutional activity in those early markets drove prices sharply higher and slashed inventories of available homes. Blomquist adds that institutions are also raising so much money from clients who want in on the game that firms have had to find more and more properties to buy.

The expert believes institutional buyers have expanded their focus from severely depressed markets with huge potential price appreciation to more run-of-the-mill areas that offer decent rents but only modest likely capital gains. "Home-price appreciation isn't a core piece of their strategy," Blomquist says.

The trend seems to be benefiting several cities in America's heartland.

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