Investor Effect on the Market

I received reports that home prices in February showed a month-over-month increase. Home prices increased 1.9 percent over the month of February. This increase was bolstered by strong sales in February. Sales transactions for the RPX Composite increased 22.9 percent month-over-month and 16 percent year-over-year through February.
 
I believe that investment buying and mild weather are contributing to this jump. Since 2009, purchases from corporate investors have increased rapidly in certain metro areas. In Los Angeles, corporate investor purchases increased 421 percent compared to a 36 percent increase in total sales. In New York, they increased 126 percent while sales increased 69 percent. The result of increased investment activity has been argued to reap both benefits and disadvantages for home prices.
 
Investors, who are primarily interested in REO properties, buy homes at a significant discount, depressing the aggregate price for houses.  Moreover, investor purchases of distressed properties at heavy discounts have hurt the values of surrounding properties by providing appraisers with low-priced comparable sales- this I have certainly noticed. Finding reliable and accurate comps gets harder everyday.
 
However, the influx of corporate investors into metropolitan housing markets, particularly those with high concentrations of foreclosures and large REO inventories, could strengthen aggregate home prices as people become aware of the fact that investors are buying up properties in large quantities. Sellers then have a strong incentive to raise their prices, which could start to firm prices in the market. I take the bad with the good. And I think good outweighs the bad this time in the market. Most certainly.