Spurred by a strong demand for rental housing and low property prices, investors are buying more houses according to the latest Campbell/Inside Mortgage Finance HousingPulse Tracking Survey.  The report says that investor purchases represented 22.3 percent of closed transactions for the month of October, the third straight month that investors have held a share greater than 20 percent.  The October figure is considerably higher than the 18 percent investor share reported earlier this week by the National Association of Realtors®. 

Campbell says that October prices for damaged bank-owned real estate (REO) fell to a two year low of $101,100 against an average for non-distressed residential properties of $255,700.  The falling price of distressed properties and the sheer number on the market is pushing home prices down overall.  The total proportion of distressed home sales, as represented by the HousingPulse Distressed Property Index (DPI), rose a full 4 percentage points to 48.4% in October.

The gap between the supply of distressed properties and their absorption by first-time homebuyers has now widened to 13.7 points in October compared to 8.8 points in September, indicating that first-time homebuyers have become less active in the distressed property housing market.

The retreat of first-time buyers, the prime market for the kind of starter-level house favored by investors, coupled with low prices are starting to make buying, repairing, and renting more attractive to investors than flipping properties.  The final factor is the strong demand for rental units.  Campbell Surveys estimates that 61.6% of investor properties purchased during the month of October will be rented out, with the remainder being flipped.

A real estate agent from Nevada told editors of the HousingPulse, "Investors are prominent in the city of Las Vegas. They both flip and rent and buy properties in bulk. Renting single family homes is an extremely viable option and seems to be a growing trend in the valley with the decreasing of prices. Our inventory is dropping so we are seeing more investors becoming aggressive with their offers."

The report quoted a second agent from California that, "Given the current conditions in the market here locally, many of the investors are purchasing homes to rent until the market turns around then possibly looking to sell in a few years. Yes, at this point renting homes is a better option than flipping because the gap between what an investor can buy a house, fix it and flip it does not cover the cost of re-selling it,"