All-Cash Buyers Push Investment Home Prices Up 19.3 Percent
Investment home prices are driving overall real estate values higher
IRVINE, Calif., May 24, 2016 – HomeUnion, an online real estate investment management firm and data provider, has released April 2016 data on investment homes and owner-occupied homes. Investment home prices are driving real estate values higher across the board – in both the owner-occupied and non-owner-occupied segments of the market. Median investment home prices, which include financed and non-financed properties, soared 12.5 percent to $203,000, while owner-occupied median home prices rose 5.3 percent to $251,900. The most dramatic increase was seen in the all-cash, non-owner-occupied segment of the housing market, where median prices jumped 19.3 percent to $181,000.
“Uneasiness in the equity markets helped support a surge in investment home prices last month,” explains Steve Hovland, director of research for HomeUnion. “Year over year, prices for cash investment sales jumped more than 19 percent as portfolios were reallocated at investors hedged against stocks. Cap rates for all-cash sales last month reflected investors’ willingness to accept lower, but still significant yields.”
Here’s how the investment sector of the housing market compares to the owner-occupied sector:
|
Data |
Year-Over-Year |
|
| Total Median Sales Price |
$234,600 |
8.3% |
| Owner Occupied |
$251,900 |
5.3% |
| Investment Median Sales Price |
$203,000 |
12.5% |
| Investment Cap Rate |
5.3% |
-70 basis points |
| Investment Cash Price |
$181,000 |
19.3% |
| Cash Cap Rate |
6.1% |
-90 basis points |
| Investment Leveraged Price |
$233,200 |
4.3% |
| Leveraged Cap Rate |
4.5% |
-40 basis points |
Owner-occupied homes also recorded a substantial year-over-year gain in prices. “Several economic factors combined to support price growth, including an uptick in wages, strong job growth in the first quarter and historically low interest rates. An unexpected spike in consumer sentiment and healthy auto sales provides further evidence that Americans feel confident enough to purchase homes,” says Hovland.
“Looking ahead, May home sales are expected to remain healthy after strong language in the Fed minutes indicated an interest rate hike in June is firmly on the table,” continues Hovland. “The potential for rising mortgage rates could compel some buyers to act sooner to secure mortgages prior to the June announcement.”
Disclaimer: Median sales price is based on transactions of single-family homes available through FHA financing (up to four units). Transactions above $30,000 were considered in the analysis.
About HomeUnion
HomeUnion is an online real estate investment management firm, bringing value investing to the individual investor in residential properties. Based in Irvine, Calif., it provides all the services needed for individuals to invest remotely in SFR properties. The company uses a combination of data-driven proprietary analytics to incorporate over 120M homes and 200,000 neighborhoods into their database, and then delivers its solutions to an on-the-ground infrastructure that currently serves 21 locations. HomeUnion’s role spans the lifecycle of the investment transaction: from identifying sound investments; handling all aspects of acquisition; maximizing income; protecting asset value; and selling it when the time comes.
