Investment Home Prices Rising Faster Than Owner-Occupied Home Values

All-cash investors are fueling demand for rental homes, which grew 5.1% in 2015.

IRVINE, Calif., March 30, 2016 – HomeUnion, an online real estate investment management firm enabling value investing in residential properties, has released February 2016 data on investment homes and owner-occupied homes. According to HomeUnion’s research, year-over year median investment home prices increased at a greater rate – 5.1% – than owner-occupied home prices, which rose only 1.1%. However, prices for investment homes were $185,500, compared to $236,900 for owner-occupied properties.

“Traditional home prices have peaked in light of stagnant wage growth and a lack of lower-priced properties available on the market. Nearly all of the increase in investment home prices was in the cash sector, where there’s still significant demand,” explains Steve Hovland, manager, research services at HomeUnion.

“February’s home price figures highlight the attractiveness of single-family rentals (SFRs) in an uncertain environment,” he continues. “Since last August, when weakness in the global stock markets began to erase equity, investors have been repositioning their portfolios to hedge against uncertainty. We’re seeing the results in higher investment home prices, particularly in the all-cash segment.”

Some takeaways from the existing home sales report:

  • Most buyers utilized leverage to acquire investment homes while interest rates were low. The owner-occupied price of $236,900 closely mirrored the leveraged-investment price of $239,100. Over the past year, the median sales price for these properties inched up 1.1 percent and 0.6 percent, respectively.
  • The overall median sales price climbed 3 percent during the past 12 months as investors began to grow weary of the volatile equity markets and redistributed their portfolios. The median investment sales price was $185,500, up 5.1 percent year over year.
  • Weakness abroad and in the domestic equity markets sent a flood of capital in search of safer assets, including U.S Treasuries and single-family rentals. As a result, prices for investment properties purchased utilizing entirely cash climbed 6 percent to $171,400 during the past year.
  • Average investment cap rates compressed 40 basis points to 6.1 percent during the 12-month period ending in February. Investors accepted first-year returns of 4.7 percent for leveraged transactions.

Here’s more detail on how investment home prices compare to traditional home prices:

Data  YOY Change
Total Median Sales Price $218,600 3.0%
Owner Occupied Median Sales Price $236,900 1.1%
Investment Median Sales Price $185,500 5.1%
Investment Cap Rate 6.1% -40 bps
Cash Price $171,400 6.0%
Cash Cap Rate 6.4% -50 bps
Leveraged Price $239,100 0.6%
Leveraged Cap Rate 4.7% -20 bps

Disclaimer: Median sales price seasonally adjusted and 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.

Media Contact:

Stacey Corso


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