Investors Flee Duplex Market

According to the National Association of Realtors, just 15 percent of June’s housing sales were driven by investors.

This is the lowest market share they’ve had since October, 2008.

On average, in the months and years since, they’ve been responsible for 30 percent or more of monthly sales. June marked the fourth straight month of decreasing investor activity.

Why are they exiting the housing market?

Rising prices and rising interest rates.

This makes sense. After all, investors are interested in making money. Paying more for a property reduces either cash flow or profit, as does paying more to use the bank’s money to buy it.

Believe it or not, investors’ presence in the market has actually impacted first time home buyers, who are usually responsible for 40-45 percent of monthly real estate sales.

The market presence of investors has caused an increase of prices, but not enough to allow many under-water homeowners to have enough equity to move-up into bigger houses. This, in turn, has led to a shortage of inventory for first time home buyers to choose from, forcing them to continue renting rather than buying.

While monthly housing numbers continue to be good, remember, monthly sales reports are the result of closings on properties that were put under contract one to two months prior. We should start to see the impact of interest rates on sales in the next month or two.

And those numbers may suggest we have a slower recovery in the housing market than we think.