For 2011, investment purchases increased significantly, according to data from the National Association of Realtors (NAR), and with more individual investors absorbing REO properties, the organization also thinks it is time to limit bulk REO sales to large institutions.
Investment-home sales increased 64.5 percent to 1.23 million compared to 749,000 in 2010, according to NAR’s 2012 Investment and Vacation Home Buyers Survey, which covers existing- and new-home transactions in 2011.
Investment sales also accounted for 27 percent of all transactions in 2011, up from 17 percent in 2010. On the other hand, owner-occupied purchases fell 15.5 percent to 2.78 million.
In its letter to federal agencies and regulators, the NAR stated that it urged policymakers and lenders to focus on expanding the availability of financing for qualified homebuyers and investors to reduce the number of REO properties on the market.
“More must be done to expand the availability of financing for qualified home buyers and investors to help draw down REO inventory rather than focusing on programs that
could line the pockets of Wall Street companies and financial investment firms,” said Veissi.
NAR also urges caution when assessing mortgage-to-lease programs, such as the one Bank of America rolled out recently, which allows some customers facing foreclosure to rent out their home instead of losing their home in the foreclosure process.
“Realtors believe pre-foreclosure efforts should be intensified to help reduce the number of properties that end up as REOs,” said Veissi. “We hope that efforts will remain focused on keeping families in their homes as homeowners, rather than on programs that consolidate hundreds or thousands of properties into rentals and require large financial institutions to act as landlords.”
Proponents of the bulk REO rental programs see them as a way to reduce the number of foreclosed properties on the market, which bring property values down for other homes in the neighborhood.
Profile of investors:
-Forty-nine percent of investment buyers paid cash in 2011, and about half of all investment home purchases for the year were distressed homes.
-Half of investors said their main reason for the purchase was to generate rental income, and 34 percent wanted to diversify their investments or saw a good investment opportunity.
-Median investment home price: $100,000
-Median age: 50
-Forty-one percent of investment properties were in the South, 23 percent in the West, 17 percent in the Midwest, and 15 percent in the Northeast.
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