A.D. Cantelmo Property Management
Our Business is Property Management in Orange County California
Is it time for
Institutional investors to cash out of the Real Estate Market
I have talked about the large
investment companies that entered the Real Estate Market and bought up many of
the distressed properties in the last few years. Many of these investors have
held on to those properties and became Landlords, but is it time for them to
get out?
Many of the area’s that were hit the
hardest in the Real Estate Market bubble crash, now have made significant
increases in the price of the once distressed properties.
I was
reading an interesting article in DS News that made the point that the profit
that these institutional investors could make, if these properties were sold
now, may be too much for them to pass up. In the article it showed that Realty
Trac analyzed more than 200,000 purchases made by institutional investors
(defined as home buyers who made 10 or more purchases in a calendar year) made
during a two-and-a-half year period from January 2012 to August 2014.
. The average purchase price of those 200,000
properties was $167,556, and those properties have a current estimated value of
$211,897, which would result in a gained equity of 26 percent (a combined total
of $8.9 billion) if all of these properties were sold today, according to
RealtyTrac.
The interesting part of this to me,
is that the investors actually created the increase in the price of the homes,
due to the fact that in buying up all these distressed properties they removed
much of the inventory and created a low inventory situation that increased the
price. When you look at it, you have to marvel at the way these investors
created their own profit. Remember, the more a product is available, in this
case distressed properties, the less the product is worth, but as the products
supply becomes limited the price goes up, because it creates an artificial panic
that the product will become unavailable.
The important thing to Homeowners is,
if these investors start to sell off these assets, will it put so much
inventory on the market that the prices of homes will start to decline. That is
a possible scenario, but I would imagine that these investors when they decide
to liquidate their assets, they will do it in a way that will not flood the market,
because remember, they will not want the properties that they still hold to
lose their equity. Whatever happens, it will be interesting to watch how all
this unfolds. It is something that all homeowners should keep an eye on,
especially if they are thinking about selling in the near future.
A.D. Cantelmo Property Management Specializes in Property
Management on Orange County Ca.