This was very easy to see coming and something we called long before being interviewed by Realty Trac for their May 2014 article about the Atlanta market. The article addressed the very same concerns that we have been expressing; that the impact of the institutional investors has completely skewed the Atlanta market and that while areas have stabilized, removal of the institutional purchases shows a much different and less robust market. The other significant concern is the impact once the institutional investors move on to other more lucrative investment opportunities. None of this is breaking news, we’ve been following this false bounce for years.
For years, institutional investors were lured to Atlanta because of declining home prices and cheap foreclosures. Now, with home prices rising rapidly and inventory shrinking, institutional investors are pulling back on their purchases, experts warn. Institutional Wall Street investors like American Residential Properties, Blackstone, Starwood Waypoint Residential Trust, Colony American Home Rental and others have dramatically slowed their purchase of single family homes, according to Collis Clovie, managing broker of Century 21 InTown, in Atlanta. Clovie said Atlanta’s residential real estate market is running out of steam. He predicted that a glut of inventory will hit metro Atlanta in the next two years, pushing prices downward.
Spot on and we feel that the window for these investors to start dumping will be about the time the homes require rehab from the initial rental push – over the next 18-24 months. As money is required for repair, contractors drag on, rental management fees accumulate and homes sit empty not generating cash things will start moving. That reduction on return doesn’t work for investors and they will cut and run to other, less intensive opportunities. It’s a very good bet that as soon as one starts dumping in earnest, others will quickly follow – trying to stay ahead of the inventory glut.
“I’m firmly convinced that when the institutional investors see their properties become a liability, that’s when they are going to cut and run,” warned Miller. “It will be interesting to see how it plays out. There’s a lot of trepidation in the market.” Clovie, the REO listing broker, agreed with Miller’s assessment. “Right now everything is rosy in Atlanta,” said Clovie. “But if the hedge funds start selling their inventory, it will be disastrous for the marketplace.”
To be clear, my observations and opinions on all of this are area specific and focus mainly on the $150K and under investor market. I do expect that many first time buyers will be impacted; many are right now by having to compete for the few decent homes out there. In many cases they cannot effectively compete due to price and mortgage difficulties, they are feeling the impact right now.
Recovery in the “Atlanta” housing market is spotty at best and the data is useless unless broken down to the micro market. The best data is often that which is boiled down to the middle or high school level, is actually comparable to the house in question and looks back a good three years. The bottom line on all of this is that the need for knowledge and caution cannot be overstated – nor the need to properly select your real estate agent.
- See more at: http://hankmillerteam.com/2014/05/18/headwinds-pushing-institutional-investors-away-from-atlanta/#sthash.ZENa3rvy.dpuf
