Home buyers scooped up fewer investment properties and distressed sales last year, as rising prices likely meant there were fewer good deals on the market, according to the National Association of Realtors.
Investment home sales fell 7.4 percent as prices for those homes declined 3.8 percent in 2014, the NAR 2104 Investment and Vacation Home Buyers Survey reported. Investment sales accounted for 19 percent of 2104 transactions.
“Despite strong rental demand in many markets, investment property sales have declined four consecutive years to their lowest share since 2010 as rising home prices and fewer distressed properties coming onto the market have further reduced the number of bargains available to turn into profitable rentals,” NAR Chief Economist Lawrence Yun said in a press release.
But even as sales dipped, 86 percent of investors said they believe it is a good time to buy real estate, with 68 percent saying they were very or somewhat likely to buy again in the next two years, according to the NAR survey.
The median price for investment homes dipped to $125,000, down from $130,000 in 2013. The decline came as investors bought smaller properties, including an increase in townhomes and condos. The median size of investment properties was 200 square feet smaller than in 2013. At the same time, investors bought fewer distressed properties last year – 44 percent in 2014 compared to 47 percent in 2013.
And just 41 percent of investors paid cash for their properties last year, down from 46 percent the year before. Some of the survey’s additional finding about investment home sales include:
- 61 percent of investors bought single-family homes
- Investment properties were located a median of 24 miles away from investor’s residences
- 37 percent of investment buyers purchased properties for the rental income. And 17 percent said they made the purchase because it was a good deal, while 15 percent said they purchased for potential price appreciation
- Investors plan to keep their properties for a median of five years
- Most investors bought in the suburbs (32 percent) and urban or central city areas (26 percent)
- The South, which includes DC, Maryland, and Virginia, was the most popular region among investors, with 37 percent of investment sales. It was followed by the West at 26 percent, the Midwest at 20 percent, and the Northeast at 17 percent. This NAR infographic gives more details on types of sales by region.
–By Jill S. Gross