A healthier real estate market in 2015 has driven the enthusiasm and optimism of investors and encouraged them to buy more, which is contributing to sustained market growth.
Investors adapt to a healthier market
In an upbeat and healthier market, investors are showing strong optimism and increasingly focusing on properties with a higher price tag.
Some interesting facts to note here include:
Higher price bands
As compared to 2014, more investors are focusing now on higher-priced houses; however, properties worth $40,000 and less are getting less attention. Real estate experts attribute this behavior to increasing property prices and picked-over inventory.
It’s noteworthy that as the price band goes north, the number of investors considering homes in that range also increases significantly. In fact, recent research shows a 63 percent increase from 2014 of investors looking at houses worth more than $200,000.
When taking a closer look at the demographics of investors, it was found that the more active prospective buyers search the full spectrum of housing prices to locate the deals of their choice. However, investors who bought fewer than seven properties typically searched in the sub-$100,000 ranges.
Investment portfolio growth
Experts predict investor portfolios will grow in 2015. Last year’s survey found that 38 percent of investors planned to buy four or more houses in 2014. Although a follow-up to these prospective buyers a year later revealed that only 25 percent actually bought the predicted four or more properties, investors are exceptional energized about buying more properties this year.
Thanks to strong optimism of retail investors, as many as 49 percent are planning to buy at least four houses this year. This is a significant increase compared to 2014 when 25 percent actually bought four or more houses. The number of investors planning to buy 11 or more houses in 2015 has jumped to 17 percent, up from 12 percent in 2014.
Broadened property searches
Fewer investors are searching for local property deals as compared to last year, and less than 50 percent are saying they would consider searching citywide.
The trend shows that finding local property deals is getting tougher and forcing more investors to look statewide and even beyond this year. There was a 3 percent growth since last year of investors looking statewide and elsewhere.
Florida is found to be the most popular choice of investors opting for homes outside their home state. This shows that investors now prefer higher-priced houses irrespective of whether it is located within their home state or elsewhere.
When it comes to financing options, they are found to vary by geographic distance. However, irrespective of whether an investor buys in- or out-of-state, cash is the preferred mode of financing.
Looking for smaller spaces
There are a number of investors interested in smaller spaces rather than large bungalows. People move out of the city and settle down with kids. But then as children grow and move out, they might find their home to be too large to stay. This is when they prefer moving back into the city in a comparatively smaller space.
Market ripe for rapid growth
The total household income of a median investor in the U.S. is in the range of $100,000-$125,000, which is twice as much as the median income of $53,000.
Still, investment income contributes just a tiny part to their total income, with a quarter of all investors making less than 10 percent of their total household income from investing.
On average, 36 percent of total household income was from residential investing, which showed that investing doesn’t quite pay all the bills. But it sure is nice to have additional passive income to augment an investor’s primary income.
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