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Affordable Home Prices Draw Investors to Real Estate Market

Affordable Prices Draw Investors to Real Estate

RISMEDIA, November 21, 2009—Affordable prices and foreclosures are attracting investors to the housing markets today, and the number of consumers interested in investing in real estate has doubled since March 2009, according to the new Homeownership Survey recently released. Low prices and foreclosure bargains have also become the most important reasons motivating buyers today to purchase a home.

According to the survey, one out of eight (12.1%) homebuyers today plan to purchase a home as an investment property, compared to 5.6% seven months ago. Of those interested in buying a home for investment, 15.8% were men and 8.1% were women.

Foreclosure buyers, accounting for 25.3% of consumers interested in purchasing a home, are a major source of potential investment activity for today’s housing market. Forty-two percent (42%) of potential foreclosure buyers regard their purchases as investments, while 57.6% plan to live in the foreclosed home themselves. Foreclosure investors, according to the survey, intend to convert their foreclosures into rentals (13.2%), fix them up for re-sale (11.3%), or house a family member until the home can be sold at a profit (17.4%). Of the 42% interested in purchasing a foreclosure as an investment, survey respondents ages 35 to 49 (52.6%) were by far the largest demographic.

Expected Profits Gained From Purchase Discounts and Appreciation
The survey found foreclosure buyers expect to profit from both deeply discounted purchase prices, as well as healthy appreciation rates over five years. Most foreclosure buyers (58.2%) expect to pay 20% or less than market price for a foreclosure, while 38.5% expect a 25% or greater discount. While, 73% expect their properties to appreciate ten percent or more in five years, 28% expect their purchases to appreciate 20% or more during that same investment horizon.

According to the Federal Housing Finance Administration’s Purchase Index, homes have appreciated an average of 15% nationally since 2004. According to the survey, the most important reasons motivating prospective home buyers and investors to purchase a house include concerns that prices are as low as they will go (23.6%) and the desire to take advantage of foreclosure bargains (18.7%). The second most important reasons motivating property purchases include taking advantage of the great selection of homes for sale in their community (21.2%) and concern interest rates will rise (14.2%).

“This latest Homeownership Survey validates what many had hoped to see in the housing markets – affordable prices and ample inventories are restoring the appeal of real estate to investors while providing opportunities for first-time home buyers to enter the market,” said Move, Inc., Chief Revenue Officer, Errol Samuelson. “In today’s environment, regardless of whether you’re an investor or interested in purchasing a home to live in yourself, residential real estate is a more attractive investment today for many than it has been in recent years.”

Fear of Foreclosure Fades
While foreclosure filings reached record levels in the third quarter in 2009, with one in every 136 American homes receiving a foreclosure filing, homeowners today are actually less concerned that they or someone they know may be facing foreclosure as compared to seven months ago. In March 2009, 52.5% of all survey respondents said they were concerned that they or someone they know may face foreclosure in the next 6 to 12 months. That number dipped slightly to 45.1% in October 2009. According to the survey, fear of foreclosure today is greater among women (49.3%), with people earning $50,000 or more annually (43.9%), and with people living in the South (42.6%) and West (55%). The six states today with the highest rate of foreclosures are California, Florida, Arizona, Nevada, Illinois, and Michigan. These six states accounted for 62% of the nation’s total foreclosure activity in the third quarter of this year.

Permission to re-post by Rismedia-More San Diego Real Estate articles & tips; at Gary Giffin web or search for San Diego Real Estate and foreclosure homes at Gary Giffin MLS search


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