Harvard Study Examines Role of Investors in Atlanta

Harvard Study Examines Role of Investors in Atlanta

02/07/2013 BY: KRISTA FRANKS BROCK

Atlanta, one of the metros hardest hit by the foreclosure crisis, has experienced an uptick in the role investors play in its housing market.

Also, since the foreclosure crisis, the investors’ activities and strategies in the market have shifted, according to a new report from Harvard’s Joint Center for Housing Studies.

At the start of the foreclosure crisis, investors stepped into the Atlanta market to buy up REO properties and flip them. However, starting in 2008, more investors began shifting their focus to renting their REO purchases.

Investor activity tended to vary somewhat by neighborhood, according to the Harvard study.

Investors appeared to be more active in the south and southwest parts of Atlanta, where poverty and vacancy rates are high and median home values are low.

REOs in these lower-income neighborhoods have also been slower to resell after being purchased by an investor.

REOs in neighborhoods with 90 to 100 percent REO-investor tracts were 60 percent less likely to resell within one year than neighborhoods with at most 50 percent REO-investor tracts.

Additionally, the type of investor varied by neighborhood with smaller investors more likely to purchase properties in areas with lower percentages of REO-investor tracts, and larger investors tending to be more active in more distressed neighborhoods with higher REO-investor tracts.

Investors also tended to sell to other investors more often in more distressed neighborhoods. In neighborhoods with at most 50 percent REO investment, investors only flipped properties to other investors 10 percent of the time. In neighborhoods in the 90 to 100th percentile, 64 percent of flipped homes were resold to other investors.

The majority of investors in Atlanta properties are based in Georgia or have Georgia addresses, according to the Harvard study. In fact, in 2011 84 percent of REOs that had been likely purchased by investors were owned by companies with Georgia addresses.

Investors noted a perceived increase in out-of-state investors in 2012 with much of their activity concentrated in less-distressed neighborhoods.

Investors cited several concerns to the Harvard researchers, including possible negative impacts of bulk purchases, “difficulties posed by current appraisal and home lending practices when trying to sell to owner-occupants,” and the “challenges of renting properties to low-income tenants who are highly vulnerable to economic shocks and without substantial financial reserves.”

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