National Survey Reveals Decrease in Investment Home Sales

The National Association of Realtors (NAR) has reported a decrease in the acquisition of investment properties and distressed sales in the previous year.

The rising prices in the real estate market have likely contributed to fewer attractive deals for potential buyers.

In 2014, investment home sales dropped by 7.4 percent as prices for these homes also dipped by 3.8 percent, as indicated by the NAR 2104 Investment and Vacation Home Buyers Survey. Investment sales composed 19 percent of all transactions in 2014.

The continued increase in home prices and a drop in distressed properties on the market have led to a decline in investment property sales for the fourth year in a row. This has resulted in the lowest share of such sales since 2010, according to NAR Chief Economist Lawrence Yun.

Despite the downturn in sales, a significant 86 percent of investors are optimistic about the real estate market, believing it's a suitable time to purchase properties. Furthermore, 68 percent of investors said they are very or somewhat likely to buy again within the next two years, according to the NAR survey.

The median price for investment homes fell to $125,000, a decrease from $130,000 in 2013. This drop occurred as investors shifted their focus towards smaller properties, leading to an increase in the purchase of townhomes and condos. Consequently, the median size of investment properties purchased was 200 square feet smaller than the previous year.

Investors also bought fewer distressed properties, with 44 percent of purchases in 2014 compared to 47 percent in 2013. Additionally, only 41 percent of investors paid for their properties in cash, a decrease from 46 percent in 2013.

Additional findings from the NAR survey revealed:

• 61 percent of investors bought single-family homes.
• Investment properties were located an average of 24 miles away from investors' residences.
• 37 percent of investment buyers purchased properties for rental income. Meanwhile, 17 percent bought due to good deals, and 15 percent bought for potential price appreciation.
• On average, investors plan to hold onto their properties for five years.
• The majority of investors purchased in suburbs (32 percent) and urban or city areas (26 percent).

The South, including DC, Maryland, and Virginia, proved to be the most popular region for investors, accounting for 37 percent of investment sales. This was followed by the West (26 percent), Midwest (20 percent), and Northeast (17 percent).

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