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Higher Home Prices Cool Buying Frenzy

June 6, 2013

Daily Real Estate News | Thursday, June 06, 2013

The recent rise in home prices has more investors concerned that it will be increasingly difficult to turn a profit from their rental investments. Nearly half of U.S. real estate investors say they expect to purchase fewer rental homes in the next year, according to a recent survey conducted by polling firm ORC International.

Just 10 months ago, the percentage of investors who said they intend to buy fewer homes stood at 30 percent—compared to 48 percent today. Only about 20 percent of the investors surveyed say they plan to buy more homes in the next year—a drop from the 39 percent who reported they intend to buy more homes last August.

More than half of the investors surveyed who own rental properties say they plan to hold them for at least five years or more, and 33 percent plan to hold them for 10 years or more.

“Higher prices are reducing returns on investment and investors are responding by cutting back on their purchasing plans until conditions sort out,” says Chris Clothier, a partner in MemphisInvest.com and Premier Property Management Group. “Fewer foreclosures, rising property values, and competition from hedge funds are making it tough to find good ideals on distressed sales. On the other hand, investors are planning to hold onto their rental properties for at least eight to 10 years and realize the benefits of rising rents and low vacancy rates. Cash flow is much more important than appreciation.”

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2 Responses to “Higher Home Prices Cool Buying Frenzy”

  1. Daryl @ Screen Porch Kits on July 29th, 2013 6:08 am

    Thank you for the information Chris. It looks like there will be fewer investment buyers in the short term, do you think that will make it easier for local home buyers to purchase a short sale home or will it continue to be hyper-competitive?

  2. Coconut Grove Realtor on August 7th, 2013 5:24 pm

    Seems like buyers need to start making a decision while the prices are low and the interest rates are low. Sellers need to understand the situation the market is in right now — we are still low, but prices are on the rise. It’s hard to get top dollar for your home.

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