Investors are pouring into housing markets across the country. According to the November Report of Market Conditions by Inside Mortgage Finance, 20% of all home purchases nationwide are now made by investors. In some major markets, this percentage is much higher.
What attracts investors these days is very different from what drew them during the bubble years. They are not really enticed by appreciation potential and leverage. Investors are lured mainly by low prices and positive cash flows.
Many of them are also searching for an alternative to the ridiculously low rates they now receive from money market funds, U.S. Treasury securities or bank CDs. One knowledgeable Phoenix broker explained that his investor-clients are often 50 and older who have been pulled into residential investing because of the plunge in interest rates they've had to endure. Quite a few have liquid assets over $1 million and are looking for a better return.
Metros that experienced the greatest price bubbles and subsequent collapse have seen hordes of investors leap into their housing markets - especially Las Vegas, Phoenix, several Florida cities, and cities in the California Inland Empire. These investors are fairly confident that prices are nearing a bottom and that the risks of major declines are minimal.
Let's take a look at some of these markets to see whether investors are acting on sound information. The following table from CoreLogic data shows the ten weakest large counties in the U.S. in terms of distressed properties which have not yet been foreclosed and repossessed by lenders as of the end of September 2010.
| Top Ten Larger Counties Distressed Mortgage Percentages - 3d Quarter 2010 | ||||||
| COUNTY | Active Loan Count | 90+ Days Delinquent | % Delinquent | Defaults | % Defaults | Distressed Total |
|---|---|---|---|---|---|---|
| Miami-Dade | 366,775 | 26,735 | 7.29% | 64,708 | 17.64% | 24.9% |
| Broward (Ft. Lauderdale) | 328,721 | 21,939 | 6.67% | 44,251 | 13.46% | 20.1% |
| Orange (Orlando) | 204,944 | 13,020 | 6.35% | 24,839 | 12.12% | 18.5% |
| Clark (Las Vegas) | 360,192 | 32,932 | 9.14% | 32,388 | 8.99% | 18.1% |
| Riverside (CA) | 368,432 | 32,622 | 8.85% | 17,965 | 4.88% | 13.7% |
| Prince George's (MD) | 148,228 | 13,800 | 9.31% | 6,367 | 4.30% | 13.6% |
| San Bernardino (CA) | 315,992 | 27,051 | 8.56% | 14,980 | 4.74% | 13.3% |
| San Joaquin (Stockton, CA) | 105,519 | 8,887 | 8.42% | 5,021 | 4.76% | 13.2% |
| Kern (Bakersfield, CA) | 114,247 | 8,031 | 7.03% | 4,929 | 4.31% | 11.3% |
| Maricopa (Phoenix) | 715,944 | 43,164 | 6.03% | 31,807 | 4.44% | 10.5% |
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