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Small investors form majority of foreclosure-auction homebuyers


Although large institutional investors carved up the biggest share of foreclosure-auction home purchases when the market bottomed out, a new report shows that mom-and-pop real estate investors have now risen to the top spot.

Foreclosure auctionA survey from Auction.com, the nation’s largest marketplace for distressed properties, found that 51% of foreclosure-auction buyers plan to purchase fewer than five properties in 2019. Only 2% of foreclosure buyers, on the other hand, said they plan to purchase more than 100 properties this year, while 22% plan on purchasing between 10 and 100.

“Foreclosure auctions are no longer dominated by larger investors able to navigate what was an opaque process of purchasing a property at the courthouse steps or from a hard-to-find REO (real estate owned) asset manager,” Auction.com CEO Jason Allnutt said. “The majority of foreclosure and REO auction buyers are now smaller mom-and-pop investors who are taking advantage of a much more accessible buying experience.”

The survey also found that investors are looking to the South region for properties. Nearly three out of four (73%) survey respondents indicated they are buying properties in the South, compared to 39% in the Midwest, 22% in the Northeast and 13% in the West. Additionally, 4% of buyers purchasing properties in the South were large investors with plans to buy more than 100 properties this year — twice the national average.

Forty-three percent of buyers in the South considered that market “fundamentally sound with solid growth.” That’s higher than the national average of 37% and the highest share of any response to a question about local market conditions. The second highest response, however, was “overvalued with correction possible,” with 24% — nearly one in four buyers — evaluating their market in this manner.

Only 7% of respondents, however, expect that correction to occur in the next 12 months in the form of flat or declining home prices. The vast majority of respondents anticipate low single-digit home-price growth of 5% or less in the coming year. Thirty-three percent, for example, estimate price appreciation of 3% to 5% in the next 12 months. Fourteen percent are especially bullish, expecting price appreciation of 10% or more.

The survey results may be particularly prescient for evaluating the housing market as a whole, said Min Alexander, chief operating officer of Auction.com.

“Auction.com buyers are on the front lines of the real estate market, transacting at a much faster velocity than retail buyers,” she said. “That means they are often the first to recognize emerging shifts in the marketplace.”

 


 

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