Investors optimistic about housing market, survey says

Investors in the housing market remain bullish about their chances for turning a profit, according to results of a survey issued today by online real-estate firm Move Inc., based in Campbell, Calif.

Among their reasons to be optimistic were weak competition from traditional homebuyers, strong demand for single-family rental properties and the relatively low cost of buying and fixing up homes.

However, the survey's results also point to some perceived weak spots in the market, including stagnant resale prices and difficulty obtaining purchase loans.

Move Inc., a publicly held company that trades on the NASDAQ exchange under the symbol "MOVE," sponsored the survey, which included responses from about 200 real-estate investors and 800 non-investors. All respondents were 18 or older.

According to the survey's results, real-estate investors were three times as likely as traditional buyers to express interest in buying a home within the next two years, and nearly two-thirds of investors said they believe lack of competition from traditional buyers will make it easier to find bargain purchases during the next six months.

The survey results, which only include responses from U.S. investors and do not break them down by geographic area, also suggest that investor interest and activity could be on the rise.

About 62 percent of investors said they are paying more attention to home values in their local markets than they were a year earlier.

Responses indicated a widespread belief that prices will remain flat in the near future, with 22 percent of investors expecting prices to rise in the next six to 12 months, 23 percent expecting further price declines and 54 percent predicting no significant changes.

Nearly 66 percent said they expect competition from first-time homebuyers to diminish because of difficulty obtaining financing.

However, the majority of investors said they also planned to finance future home purchases, at least partly. The majority, about 57 percent, also cited difficulty obtaining loans as one of the biggest challenges they faced.

Only about 19 percent said they planned to buy with cash, with about 81 percent of those expecting to receive a cash-only discount from sellers.

Nearly 76 percent of investors said they plan to borrow money to cover a portion of future home purchases, with nearly 60 percent expecting to finance more than 50 percent of their investments.

Just 16 percent said they would use cash to cover more than 50 percent of future home purchases.

"The fact that most real-estate investors plan on combining cash and credit for their purchases goes against the conventional wisdom that investor transactions today are mostly cash-only sales," Move Inc. Chief Executive Steve Berkowitz said. "The data also shows they're expecting high returns to match the level of investment they're making in an arena that is new to many investors."

Only a small portion of respondents said their goal was to "flip" the homes within the next 12 months.

About half said they planned to rent out their homes for at least five years.

About one-third of self-identified investors said they were in the process of researching or preparing to invest in a home but had not yet done so.

Among active investors, about 59 percent said they had made at least one other real-estate investment in the past, while the other 41 percent identified themselves as first-timers.

About 42 percent said they planned to do future repairs themselves, about 30 percent said they planned to hire a contractor for repairs, and the other 28 percent planned to buy homes that weren't in need of any repairs.

About 66 percent of respondents said they did not expect repair costs to exceed 20 percent of the property's purchase price.

"This data suggests today's climate is hot for investing and is attracting a lot of new people that don't fit the stereotypical, deal-driven flippers that buy and sell properties quickly," Berkowitz said. "They're mostly entrepreneurial individuals that will make vital contributions to local communities by investing their own money and sweat equity."

In exchange for their risk and hard work, investors responding to the survey expressed high expectations for reaping financial rewards.

Nearly half said they expected a profit of 20 percent or more, such as with 4 percent annual rate of return over five years. Another 40 percent expected a profit of at least 10 percent.

Just 7 percent said they expected to make a return of 5 percent or less.

While the survey indicates investors will outnumber traditional homebuyers 3-to-1 during the next two years, it also revealed significant overlap between first-time investing and buying a home to occupy.

About 27 percent of first-time investors said they also planned to buy a primary residence. Almost half said they planned to live in their investment property until it was sold or turned into a rental property.

Slightly more than half planned to put their investments to work as rental properties, and 28 percent said they planned to buy a vacation property that they would sell eventually.

The survey also found 30 percent of real-estate investors are interested in buying a retirement property as an investment.

"The survey suggests some first-time buyers may be looking at investment as a strategy to becoming homeowners," Berkowitz said. "While today's market is tough for some, it's also motivating millions to take an unconventional approach and creatively search for new ways of entering the housing market."

Move Inc. operates Move.com, a Web portal for home-sales and rental listings; Realtor.com, the official website of the National Association of Realtors; and other sites including SeniorHousingNet.com, MortgageMatch.com and Moving.com.

The survey was conducted by telephone in April and had a margin of error of plus or minus 3 percentage points.

by J. Craig Anderson The Arizona Republic May. 25, 2011 07:14 PM




Investors optimistic about housing market, survey says