Ordinary Americans Priced Out Of Housing: Institutional Purchases Hit Record, Half Of All Deals Are "All-Cash"

Tyler Durden's picture


If there was any doubt that the US housing "recovery" is anything but the latest speculative play by deep-pocketed (namely those who already have access to cheap funding) investors, who are now engaged in rotating cash gains out of capital markets and into real estate, on their way hoping to flip newly-acquired properties to other wealthy investors, then the most recent, September, RealtyTrac report will put that to rest. To wit: Institutional investors (purchasing 10 or more properties in the last 12 months) accounted for 14 percent of all sales in September, up from 9 percent in August and also 9 percent in September 2012. September had the highest percentage of institutional investor purchases of any month since RealtyTrac began tracking in January 2011....All-cash purchases nationwide represented 49 percent of all residential sales in September, up from a revised 40 percent in August and up from 30 percent in September 2012. In other words, institutional purchases are now at all time highs, with all-cash accounting for half of all transactions!

From RealtyTrac:

The housing market continues to skew in favor of investors, particularly deep-pocketed institutional investors, and other buyers paying with cash,” said Daren Blomquist, vice president at RealtyTrac. “While the institutional investors are pulling back their purchases in many of the higher-priced markets — places like San Francisco, Washington, D.C., New York, Seattle and Sacramento — they are continuing to ramp up purchases in markets where median prices are still below $200,000 — places like Jacksonville, Atlanta, Charlotte, St. Louis and Dallas. The availability of distressed inventory also makes a difference. For example, institutional investor purchases have rebounded in Las Vegas corresponding to a recent rebound in foreclosure activity there.

So after gobbling up all the real estate in the marquee markets, the Private Equity and other loaded with cash institutions have now swooped on the B and C-grade markets, where they have essentially priced out all ordinary remaining buyers, making sure the mortgage origination pathway remains slammed shut, and assured a lifetime of rental existence for the vast majority.

Here are the other distrubing findings from the RealtyTrac report:

  • Institutional investors (purchasing 10 or more properties in the last 12 months) accounted for 14 percent of all sales in September, up from 9 percent in August and also 9 percent in September 2012. September had the highest percentage of institutional investor purchases of any month since RealtyTrac began tracking in January 2011.
  • Among metro areas with a population of 1 million or more, those with the highest percentage of institutional investor purchases in September were Atlanta (29 percent), Las Vegas (27 percent), St. Louis (25 percent), Jacksonville, Fla., (23 percent), Charlotte, N.C., (17 percent), Memphis, Tenn. (16 percent), Richmond, Va., (15 percent), Dallas (15 percent), and San Antonio, Texas (15 percent).
  • All-cash purchases nationwide represented 49 percent of all residential sales in September, up from a revised 40 percent in August and up from 30 percent in September 2012.
  • Among metro areas with a population of 1 million or more, those with the highest percentage of all-cash sales were Miami (69 percent), Tampa, Fla. (62 percent), Jacksonville, Fla. (62 percent), Las Vegas (62 percent), Orlando, Fla., (59 percent), Atlanta (54 percent), Cleveland (51 percent), and Memphis, Tenn. (51 percent).
  • Short sales accounted for 15 percent of all U.S. residential sales in September, up from 14 percent in August and 9 percent in September 2012. States with the biggest percentage of short sales were Nevada (32 percent), Florida (30 percent), Ohio (26 percent), Maryland (22 percent), and Tennessee (21 percent).
  • Among metro areas with a population of 1 million or more, those with the highest percentage of short sales were Las Vegas (34 percent), Columbus, Ohio (33 percent), Tampa, Fla. (33 percent), Memphis, Tenn., (32 percent), and Miami (32 percent).
  • Sales of bank-owned homes accounted for 10 percent of all U.S. residential sales in September, up from 9 percent in August and also 9 percent in September 2012. Among metro areas with a population of 1 million or more, those with the highest percentage of bank-owned sales were Las Vegas (21 percent), Riverside-San Bernardino, Calif., (20 percent), Cleveland (19 percent), Phoenix (18 percent), and Columbus, Ohio (16 percent).
  • Annualized sales volume increased from the previous month in 34 out of the 38 states tracked in the report and was up from a year ago in 35 states. Notable exceptions where annualized sales volume decreased from a year ago were California (down 15 percent), Arizona (down 11 percent), and Nevada (down 5 percent).
  • States with the biggest annual increases in median prices were California (up 30 percent), Michigan (up 25 percent), Nevada (up 23 percent), Georgia (up 20 percent), and Arizona (up 20 percent).
  • Among metro areas with a population of 1 million or more, those with the biggest annual increases in median prices were San Francisco (35 percent), Detroit (34 percent), Sacramento (33 percent), Atlanta (27 percent), Riverside-San Bernardino, Calif., (26 percent), and Phoenix (25 percent).
  • Home price appreciation showed signs of plateauing in these top six appreciating markets. In all six markets, the annual increase in home prices was down compared to previous months this year.

Why is the above a concern? Because prices are now rolling over. And if there is one thing institutions know (and hate) - it is being the last one holding inventory. In other words, once the selling, pardon dumping, avalanche begins, watch out below.

After having made housing ridiculous expensive for anyone but other institutions, these same PE firms, hedge funds and REITs are now scrambling for the worst of the worst distressed properties anywhere they can be found:

And perhaps the one chart that puts it all into perspective:

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Thu, 10/24/2013 - 08:19 | 4085588 LawsofPhysics
LawsofPhysics's picture

"Winning" - (for those close to the free fiat money tap anyway)  Roll the motherfucking guillotines, absolutely nothing changes otherwise.

Thu, 10/24/2013 - 08:24 | 4085599 CH1
CH1's picture

Roll the motherfucking guillotines, absolutely nothing changes otherwise.

I appreciate the sentiment, but if people just stopped obeying the sons of bitches, their game would fall falt in mere months.

Thu, 10/24/2013 - 08:25 | 4085604 Stackers
Stackers's picture

"If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered."

Thu, 10/24/2013 - 08:33 | 4085621 SWRichmond
SWRichmond's picture

time to convert your cash into something real...when a bunch of people decdide to do this all at once we have a name for that...

Thu, 10/24/2013 - 08:46 | 4085676 highly debtful
highly debtful's picture

Indeed, could it possibly be that parking your cash in tangible assets is now officially a better course of action than simply using it to embellish your balance sheet? If so, interesting times ahead.

Thu, 10/24/2013 - 08:57 | 4085704 AlaricBalth
AlaricBalth's picture

The relationship between Lords and Serfs dates back to Roman times. According to Marx, the power of the ruling class rested in their control of the land. What the US is evolving into is a neo-feudalism, which is nothing more than a modern day version of bondage and slavery.

Soon the Lords will be demanding the Serfs Oath:

"By the Lord before whom this sanctuary is holy, I will to Blackstone be true and faithful, and love all which he loves and shun all which he shuns, according to the laws of God and the order of the world. Nor will I ever with will or action, through word or deed, do anything which is unpleasing to him, on condition that he will hold to me as I shall deserve it, and that he will perform everything as it was in our agreement when I submitted myself to him and chose his will."

Thu, 10/24/2013 - 09:17 | 4085773 Chuck Norris
Chuck Norris's picture

Yes but the serfs have guns this time.  At least I do!

Thu, 10/24/2013 - 11:09 | 4086324 zaphod
zaphod's picture

That's why they are slowly disarming you bit-by-bit. Your children will have less access to arms and your grand-children none. It's been done before again and again and again. Everytime a people is disarmed they are enslaved. Just look at the Russian civil war almost 100 years ago.....

Fri, 10/25/2013 - 12:37 | 4090392 N2OJoe
N2OJoe's picture

Everytime a people is disarmed they are enslaved and the rest exterminated.

Thu, 10/24/2013 - 09:53 | 4085923 Jim in MN
Jim in MN's picture

Good sir Alaric, I beseech thy pardon, but surely you do refer to Blackadder, not the craven Blackstone.

Thu, 10/24/2013 - 08:58 | 4085714 King_of_simpletons
King_of_simpletons's picture

Ordinary Americans have been priced out of the housing market for a looooooong time.

Why do you think Subprime mortgage originated and created all the subprime foreclosure crisis ?

Thu, 10/24/2013 - 10:18 | 4086038 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

Someone has to be the bag holder when houses become too expensive for average Joe 6-pack to buy. 

Thu, 10/24/2013 - 08:50 | 4085687 Lost My Shorts
Lost My Shorts's picture

Exactly.  What this says to me is -- everything you all believe about Yellen the Print Goddess is true and then some.  If the smart money insiders are buying houses in Memphis (after having bought everything in California already), then surely those fiat dollars won't be worth much soon.

Thu, 10/24/2013 - 09:19 | 4085780 Popo
Popo's picture

The Fed has already tried it.  They're continuing to try it now.   The problem is that we've hit peak-debt.   The only way for these guys to "exit" is to lend someone more money than they originally paid for the house.   That's not possible right now -- at any rate of credit.    This game has limits.  They found the limits the hard way in 2008.  Now they're desperately trying to reinflate the bubble so they can play again.  But the limits haven't changed.   There is a value beyond which you cannot get a person to borrow.  

But the really big issue has almost nothing to do with debt.  It has to do with demographics.   The great baby-boomer die-off is already beginning.   The reality is we have a hilarious surplus of houses in this country for which there are no buyers and there won't be any buyers in the forseeable future -- not even in 50 years.

This is an endgame.  Housing is dead.   D.E.A.D. dead.  You can't fight demographics.  80% of all real estate value is owned by boomers. (Not houses. Value).  Think about that for a second.   Within the next 20 years:  80% of real estate value returns to the marketplace.   (Statistically speaking, inherited houses are almost always sold btw.  Not lived in by offspring).  

So not only are we at peak debt, which limits the number of prospective buyers.  But we're at "peak housebuyer" on the demographic front.   Checkmate.  Game over.  Go home, Fed Board.  You're fooked.

Thu, 10/24/2013 - 09:34 | 4085842 KnightTakesKing
KnightTakesKing's picture

+100. That's a great analysis. So in your view, it would be better to be a renter? Or own a home but don't expect to get your money back out of it?

Thu, 10/24/2013 - 09:38 | 4085854 RaceToTheBottom
RaceToTheBottom's picture

I believe the plan is to have millions and millions of minimum wage Hispanics come flooding across the border and buying up all the million dollar houses.

Thu, 10/24/2013 - 08:33 | 4085622 Headbanger
Headbanger's picture

Tylers:   Me thinks this issue portends a much worse situation besides forcing ordinary Americans out of the housing market.

All these institutional purchases could be a mechanism for rehypothecation of collateral that amounts to the very same thing as the sub-prime mortgage black swan disaster a few years ago.

Thu, 10/24/2013 - 08:44 | 4085669 LawsofPhysics
LawsofPhysics's picture

Here's the thing about a house, like many other physical assets, as collateral.  First, one must have possession of the house.  Second, what is the neighborhood like (of course with mark to fantasy accounting this might not matter)?

Fuck it, I think only one rule applies now to all your investments; when fraud is the status quo, possession is the law.

Thu, 10/24/2013 - 09:21 | 4085793 kaiserhoff
kaiserhoff's picture

Yes, and renting single family homes is a fool's errand.

That is more true than ever, since more fools are rushing in.

Thu, 10/24/2013 - 09:58 | 4085943 Jim in MN
Jim in MN's picture

There's really only one thing that all this value is hung on: the rating of the schools near a given property.

Insane when you think about it, but that's about all that's left.  For now...............

Thu, 10/24/2013 - 08:40 | 4085649 LawsofPhysics
LawsofPhysics's picture

Yes, convert those paper promises in real assets and get your tribe in order.

Thu, 10/24/2013 - 23:04 | 4089002 Chuck Walla
Chuck Walla's picture

I appreciate the sentiment, but if people just stopped obeying the sons of bitches, their game would fall falt(sic) in mere months.

They voted for Obama twice, a man who has never done anything real and has no accomplishments on his pre-presidential resume. How will such people come to discern the game and quit it?  Sorry, the game must quit them for them to even gain a scintilla of a clue.



Thu, 10/24/2013 - 08:25 | 4085601 GetZeeGold
GetZeeGold's picture



Gotta save up here. Need to buy healthcare or pay a fine.


Justice Roberts sez so.....it's kinda the law.


Don't have a lot of money left over for fancy crap.

Thu, 10/24/2013 - 08:27 | 4085609 CH1
CH1's picture

it's kinda the law.

Fuck the law - it usurped justice a long time ago.

Thu, 10/24/2013 - 08:37 | 4085634 Kaiser Sousa
Kaiser Sousa's picture

Exactly...mother fuckers r to dumb or just to fucking afraid...

Just stop  complying....withdraw as much as humanly possible from their debt, slave driven paradigm. ...FOR FUCKS SAKE PEOPLE!!!!!!!

Thu, 10/24/2013 - 08:40 | 4085653 LawsofPhysics
LawsofPhysics's picture

"Laws" that cannot be enforced are not really laws at all.

Thu, 10/24/2013 - 10:32 | 4086115 CoolBeans
CoolBeans's picture

Heartily agree!  Despite being in compliance for living (ugh, I know but it is a biz I own, at least)...I have exclaimed to all that I can: "Do not comply - we must starve the (insert bullshit here) beast and it will die!"   

Thu, 10/24/2013 - 08:43 | 4085668 John Law Lives
John Law Lives's picture

That maggot could have dealt a death blow to Obumblecare, yet now it is the law.

Thu, 10/24/2013 - 09:37 | 4085857 KnightTakesKing
KnightTakesKing's picture

He was backmailed by TPTB and caved in. They had the "goods" on him, whatever that may be we'll likly never know.

Thu, 10/24/2013 - 08:27 | 4085608 mvsjcl
mvsjcl's picture

There is nothing "benign" about this trend. There is an evil purpose behind it.

Thu, 10/24/2013 - 08:33 | 4085623 Bangin7GramRocks
Bangin7GramRocks's picture

Healthy recovery!?!?!?

Thu, 10/24/2013 - 10:00 | 4085955 garypaul
garypaul's picture

Listen, don't anyone imagine that there has to be a "rotation" out of the stock market to go into real estate. There's enough printing for EVERY market to go up! Weeee!

Thu, 10/24/2013 - 08:19 | 4085590 firstdivision
firstdivision's picture

Inflate that housing bubble again to let it burst.  The Fed won't intervene, they love these housing bubbles.....and love them more once they burst.  I'm keeping my eye on printer cartridge orders from suppliers so I know when there is a big order, the current housing bubble will pop.

Thu, 10/24/2013 - 08:23 | 4085598 forrestdweller
forrestdweller's picture

can the economy run on rich people selling to and buying from eachother?

Thu, 10/24/2013 - 08:28 | 4085605 CH1
CH1's picture

can the economy run on rich people selling to and buying from each other?

It can, so long as the abused never do anything but complain.

They will be enslaved as long as they comply. If they comply forever, they'll be enslaved forever.

Thu, 10/24/2013 - 08:28 | 4085611 Bobbyrib
Bobbyrib's picture

Not if they are investing in rental properties. As someone else said the housing bubble will crash and this time the middle class won't be holding the bag. Maybe the Federal givernment will start buying to bailout the future rich bag holders.

Thu, 10/24/2013 - 08:38 | 4085645 Sauk Leader
Sauk Leader's picture

Think of it this way. Nearly half of all purchases are cash from big money investors. The other half are people who buy these properties from said investors. Flipping is back but now the only players are people with money. These guys have full time contractors who go from one house to the next.

Thu, 10/24/2013 - 08:26 | 4085606 ebworthen
ebworthen's picture

When everything becomes a rental, Daddy Warbucks will be able to set the rent wherever he wants, just like insurance companies setting rates.

You can't have a crony capitalist debt serfdom regime without a monopoly and eliminating the individual as competition, now can you?

Thu, 10/24/2013 - 08:29 | 4085612 mvsjcl
mvsjcl's picture

Right, eb. All about owning EVERYTHING!

Thu, 10/24/2013 - 08:30 | 4085613 Bobbyrib
Bobbyrib's picture

It's true the rent can be set at any price, but if people can't afford it they won't get renters.

Thu, 10/24/2013 - 08:41 | 4085657 ebworthen
ebworthen's picture

EBT/Food Stamps, SS disability, Section 8, Medicare, Food Pantry, Welfare, WIC. 

It's part of the feedback loop of the .gov/crony capitalist/banking cabal.

Account management by the J.P. Morgue and Wells Fargone of course.

At some point it might hit a snag; that's what all those bullets are for.

Thu, 10/24/2013 - 08:50 | 4085689 Abaco
Abaco's picture

They will get squatters.

Thu, 10/24/2013 - 08:55 | 4085703 TheFreeLance
TheFreeLance's picture

The mortgage deduction will be converted to a housing allowance -- just like in Europe. Blam -- another way for Fed script to flow to the Treasury and then straight to the banksters.

Thu, 10/24/2013 - 08:31 | 4085617 daemon
daemon's picture

".... the latest speculative play ...." 

Isn't the time of speculation over ?

Isn't it time to consider this development as a more lethal move against the republic ?



Thu, 10/24/2013 - 08:32 | 4085620 funwithstocks
funwithstocks's picture

Quelle surprise! Great article.

So the question is: Is owning a house really better than renting for an individual? It depends on whether we are in a real estate appreciation or depreciation market. It's not always the same answer. If prices are falling, renting is better. Imagine that. Conventional wisdom fails again. 

Thu, 10/24/2013 - 12:28 | 4086733 serog
serog's picture

Also, what does one do if they hold an investment property or two?  Cash out now or let it ride?

Thu, 10/24/2013 - 08:35 | 4085627 RKDS
RKDS's picture

The rich, and only the rich, are getting what they want as usual.  Will their sock puppets in DC shut up now?

Thu, 10/24/2013 - 08:37 | 4085628 scatterbrains
scatterbrains's picture

and once they own enough of the residential properties it will be necessary for local towns to give them special real estate tax breaks so that they can pass that on to the sub human renter class.

Thu, 10/24/2013 - 08:58 | 4085715 TheFreeLance
TheFreeLance's picture

Again, just like in Europe. Owners of low-income housing get fat breaks on VAT taxes. The banksters can also be incented to tear down tracts of the wrong kind of housing -- single fam on "inefficent" quarter acre lots -- and build (with a subsidy, natch) scads and scads of high-density tenements for the proles. It is all right there in front of you, folks.

Thu, 10/24/2013 - 09:13 | 4085762 adr
adr's picture

Exactly, they aren't buying the homes, they are buying the land.

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