Though investors are often blamed for driving up prices that led to both the housing boom and subsequent crash in the U.S., the market is now welcoming them. Investors are providing crucial support to this struggling sector.
Banks burned by the financial crisis are making things difficult for traditional buyers. This creates an open playing field for investors ready to spend their cash.
Even those traditional buyers who qualify for mortgages do not have things easy. They are often paralyzed by fear that the brief housing recovery of last year may lead to an even bigger decline in prices.
Enter the investors, cash in hand, to save the day. In May, all-cash buys represented 30 percent of sales for existing U.S. homes, the bulk of the acquisitions made by investors.
This figure is even more impressive when one realizes it is double the October 2008 statistic. Speculative investors have long been familiar with the housing market. The climbing percentage of all-cash purchases is relatively new, says the National Association of Realtors.
According to this group, 59 percent of those who invested in properties in 2010 did so using cash only.
To provide themselves with a safety net, some investors use both cash and loans or enter partnerships with other investors. In a sharp contrast to this, average Americans are concerned with debt and job loss, opting for payday loans over mortgages.
Even wealthy investors are taking a more cautious approach these days.
The Mortgage Bankers Association reports that demand for home loans has been low since the federal tax incentive ended last spring. Investors accounted for just 17 percent of the housing market last year, as opposed to 28 percent just five years earlier.
Current investors are focusing on the low end of this market, fixer-uppers that can be overhauled and then rented or re-sold.
