In first half of 2013, roughly 20% of Chicago area home purchases by institutional investors

A good portion of the homebuying activity in the Chicago region during the first half of 2013 was driven by institutional investors:

Chicago home prices climbed 11 percent in November from a year earlier, the biggest jump in almost a quarter century, according to S&P/Case-Shiller data. While gains are slowing across the country, the Windy City was one of nine areas in the group’s 20-city index to show a year-over-year increase in housing values…

Institutional investors, led by companies such as Blackstone’s Invitation Homes and American Homes 4 Rent (AMH), have bought as many as 200,000 U.S. properties in the last two years, taking advantage of real estate prices that fell as much as a third from the 2006 peak, and rising demand for rentals among Americans who lost their houses in the foreclosure crisis. Their reach has stretched from the hard-hit regions of California to small Ohio towns to the sprawling suburbs of Atlanta…

In Chicago, investors accounted for about 20 percent of purchases in the first half of last year, according to Geoff Smith, executive director of the Institute for Housing Studies at DePaul University in Chicago.

Like the portfolios of other investors, Invitation Homes’ Chicago-area holdings are mostly filled with properties in suburbs such as Barrington and Oak Park. The smattering of houses they own in the city itself is evidence that the rebound is starting to broaden. Even in some neighborhoods where prices fell more than the rest of Chicago during the foreclosure crisis, values are climbing.

The average homeowner may not pay much attention to this because at least their home values are increasing again. The Chicago area housing market has been sluggish and local media has made much of the uptick in home prices. Additionally, these investors are filling a void in the market.

But, this could lead to more questions in the long run.

1. What will these institutional investors do with these properties years down the road?

2. What happens when the Chicago market is no longer profitable for these institutional investors?

3. Does this mean that the average homebuyer has a better chance to buy a home or does this simply concentrate buying power in the hands of the already wealthy? In other words, this may not provide more affordable housing.

4. Since communities, particularly suburbs, tend to think homeowners are better community members than renters, is it a problem when so many homes are purchased with the intention of having more renters?

0 thoughts on “In first half of 2013, roughly 20% of Chicago area home purchases by institutional investors

  1. Pingback: How big investors buying up properties may be limiting cheaper housing | Legally Sociable

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