There will always be those who find a way to make a profit in any situation. The necessity for survival will always help man to look outside the box of the everyday and find a new way to make ends meet. The historic housing crash of 2007 has created an epic opportunity for many. In the past 6 years, the housing market has morphed from a form of shelter to one of the most popular, tradable assets. With a limited number of distressed properties and a huge influx of investors, it should come as no surprise that the housing market is now nearly as volatile as the stock market. Glenn Kelman, CEO of Redfin, and online real estate sales company stated that, “We've seen more volatility in the real estate in the past five years than we have in the past 500.” Could this be the start of a new normal?
Where is the Housing Market Now?
The amount of volatility in the housing market is proved over and over again. When news last week surfaced that sales of newly built homes had plunged over 13 percent in July, another report showed healthy gains in sales of existing homes in July. Rising mortgage rates and home prices, low confidence, tight credit and even short supply were on the short list of woes from real estate investors, but one thing stood out, investors have started pulling out of the housing market. Investors made up only 16 percent of home buyers nationally in July, according to the National Association of Realtors, compared with the 22 percent in February and 25 percent in 2009. During the worst part of the foreclosure crisis, in some of the hardest hit markets, investors had made up more than half of all buyers.
Who is Investing in Real Estate Now?
Reports show that large funds like Colony Capital, Waypoint and Blackstone have been buying thousands of properties, are driving prices higher and faster than most expected, and are currently trying to fill those houses with renters. Buying has become more attractive for larger firms because smaller investors are moving away from housing and lessening the competition. Last year, the amount of institutional investment activity exploded, and what we're seeing now is the natural progression of such exponential growth. This means a slowdown in how many homes they aquire, or letting employees go in areas where there is less demand.
What Does This Mean for Private Real Estate Investors?
With rising home prices and interest rates, many private real estate investors have started backing out of the real estate scene. Many companies give seminars to small “armchair” investors on how to buy and manage single family rentals, and most seminars are packed with wannabe real estate investors. But with the influx of larger companies in the real estate market, it makes investing that much harder for the everyday joe.
We've seen a lot happen in real estate in the past few years. The housing crash, the huge influx of investors. Then, the bulls became bears and single investors began pulling out of the housing market. One thing is for sure, all eyes are watching to see what happens next in a volatile housing market, and just where the investing can go from here.
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