Big investors buy up homes in key markets

Big investors continue to expand into more cities for single-family homes as they pull back in others.

Last month, institutional investors, who largely buy single-family homes to turn into rentals, accounted for about one in four home sales in Atlanta, Las Vegas, St. Louis and Jacksonville, data from RealtyTrac show.

They also accounted for a big chunk of sales in Charlotte and Memphis.

Price gains will likely follow the investor buyers, says John Burns, CEO of John Burns Real Estate Consulting, as they did in earlier hot investor markets such as Phoenix and Sacramento.

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He speculates that investor buyers — including institutional Wall Street buyers, individuals who flip homes for quick profits and mom and pop investors — have driven much of this year's home price appreciation.

CoreLogic data show prices up 12.4% in August year over year, but faster in areas favored by investors, like Phoenix and Sacramento, which were up 18% and 26% respectively.

"Investors were just smart. They saw that homes were undervalued. They jumped in and pushed prices back up to normal," Burns says.

Big investors still account for a small part of the overall housing market. As a result, their impact on overall prices isn't that great, said Richard Smith, CEO of real estate firm Realogy Holdings, at a Zillow housing forum Thursday.

Prices have also risen in areas that have had little investor activity, says Mike Orr, real estate expert at the W.P. Carey School of Business at Arizona State University.

Orr tracks the Phoenix market, which was one of the first targeted by investors.

In mid-2012, investor activity peaked in Phoenix, Orr says. Then, they accounted for almost 40% of home sales. Those investors would include small investors.

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For this September, Orr says investors accounted for about 23% of sales. Historically, they'd be 15! % to 20% of the market, he says.

While Phoenix home prices in August were up more than the national average, home price gains have been slowing this year, show seasonally adjusted price data from Standard & Poor's Case-Shiller index.

A "cooling wave" in terms of demand has now settled in after a frantic spring, Orr says. Falling investor interest is playing a role, but lack of enthusiasm from regular buyers is more important because they're more numerous, Orr says.