Institutional Investors Pulling Back
INSTITUTIONAL INVESTOR HOME PURCHASES
SHARE OF TOOL HOME SALES
14.0%
250K
12.0%
200K
10.0%
150K
8.0%
6.0%
100K
4.0%
50K
2.0%
0.0%
0K
SOURCE: ATTOM DATA SOLUTIONS
45% higher than the pre-pandemic average in 2019. The sales rate was also boosted by an increase in the price that local community developers were willing to pay for distressed properties. The average winning bid as a percentage of estimated “after-repair” property value increased 9% in the second quarter on a quarterly basis, the sec- ond consecutive quarterly increase in this metric after it bottomed out in the fourth quarter of 2022. After-repair value is the estimated full market value of a property in good condition.
was also 2% below the pre-pandemic average in 2019. This indicates inves- tors are staying disciplined on their pricing, particularly in comparison to the buying frenzy that occurred in 2021 and early 2022. During that timeframe, the price-to-value metric averaged 9% higher than in the second quarter of 2023. “Never get caught up in a personal battle at the courthouse steps,” said Jermaine Morgan, a Columbus, Georgia-based real estate investor who buys at foreclosure auction in the Columbus area where he grew up and also across the state line in Alabama. “There’s times when I got in a personal competition with another investor, and I went over what I said I was going to pay for it.
“I use the 75% rule,” continued Morgan, referring to capping his maximum bid at 75% of a property’s after-repair market value, minus any estimated repair costs. “Just from doing it so long, I have an idea of what my rehab costs are going to be. And if I can purchase that property within the 75% LTV rule—which I actually try to stay below that now—then I buy it.” INSTITUTIONAL DEMAND Not all categories of real estate investors are as confidently bullish in the market. The share of institutional investors—those buying at least 10 properties a year—dropped to a two- and-a-half-year low of 6.9% in the
DISCIPLINED DEMAND The price-to-value metric was still down from a year ago, by 3%, and it
thinkrealty . com | 47
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