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July 24, 2014

Are Investors Retreating From the Market?

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Are Investors Retreating From the Market?

Investors are starting to retreat from the single-family rental market, as the number of foreclosures dries up and projections for home appreciation expected to stay flat in 2014, CNBC reports. 

"I think the investor market is largely past us," Doug Lebda, chief executive of Lending Tree, told CNBC. "People were buying investment properties three, four, five years ago. What I hear is that's slowing now."

Oaktree Capital Group reportedly is selling about 500 of its homes, while other reports are surfacing — such as from investor Och-Ziff Capital management — turning into selling mode as well. Another major investor Carrington Mortgage Services says it has stopped buying up distressed homes late last year.

Still, over the past 18 months, institutional investors have spent a total of $20 billion for about 200,000 properties — or up to 12 percent of distressed home sales, according to a KBW report. 

While some investors are retracting on higher mortgage rates and lower home price gains, some investors say they’re here to stay. 

"We don’t see it as a trade; we see it as a business," says Justin Chang with Colony Capital, which owns more than 15,000 homes and purchases homes at a rate of about 1,000 per month. "There is plenty to buy.”

Laurie Hawkes, president and COO of American Residential Properties, says they are still looking at MLSs and REOs from the banks and short sales. “We’re even buying some traditional houses now where people are just putting them on the market,” Hawkes says. "We think that if you get a reasonable cost of capital, both debt and equity, you can actually not only create a very attractive return on a current basis, but in today's market, the house price appreciation that we think is still in the market is extraordinary."

Source: “Investors in rental homes: 'It's a business not a trade',” CNBC (Oct. 3, 2013)

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