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Investors, Not Renters, Jumping Off the Sidelines

December 12, 2012
By: Erica Champion, Senior Real Estate Economist
We are all gushing over each signal in the nascent housing recovery, because we know how important it is that the former headwind to economic recovery becomes a tailwind. Another month brought another issuance of good housing market news. And yet the burning question on a lot of apartment investors’ minds is: What is the impact on apartment demand?

Well, we are still waiting to see if there is one.

The data makes a compelling case that it is largely investors fueling the surge in purchase activity (see Exhibit 1). Since home sales hit rock bottom in 09Q1, there has been no positive movement (yet) in the homeownership rate. The share of purchases made by first-time homebuyers remains nine percentage points below the historical average.

While home prices and sales activity are trending up, mortgage lending activity for homebuyers is down. Prices have increased 1% and the number of sales has increased 20% since 09Q1. However, the number of mortgages taken to buy a home was down 17% over the same period.

Over the past year, while prices and sale activity surged, growing 11% and 8%, respectively, the number of mortgages granted to homebuyers remained flat. Certainly the majority of the hard-hit middle class, the kinds of owner-occupants who would purchase a home priced at $172,000, will need a mortgage today in order to buy a home. But since mortgage lending is still down, it is not new Average Joe and Jane homeowners who are snapping up these homes.

It is investors (read: not renters) who are jumping off the sidelines to drive this recovery. That is good news, good news to apartment investors.


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