Their effects on rising home prices, not to mention what might happen in a real-estate "bubble," are being noticed.
In December, Federal Reserve officials warned they were concerned about speculative demand affecting housing prices and said they were watching some regions' activity closely.
Last year, speculators went into overdrive in Las Vegas, Phoenix, many parts of California and southern Florida, buying perhaps 15 percent or more of homes sold. In those areas, people who were buying a home as a residence complained loudly that they were being pushed out of the market.
Besides driving up housing prices and assessments, a flood of investor-owned houses can depress prices when a market loses its sizzle.
If price-appreciation rates slow — or worse, decline — speculators have more freedom to cut their asking price, sell quickly and get out. Left behind are occupant homeowners, who often must realize a certain profit to buy their next house.
In Phoenix, homebuilders have announced speculators are no longer welcome.
"We were seeing other markets where there were tremendous influxes of investors, particularly Las Vegas," said Susan Williams, a spokeswoman for Element Homes, a Phoenix homebuilder. "They'd come in and buy 10 or 20 homes and flip them or rent them out.
"In some subdivisions, up to 60 percent of the owners were investors, which was leaving the regular homeowners in an uncomfortable situation. The market became flooded with rentals."
When Phoenix began to become a magnet for out-of-state investors, Williams' company and other builders in Phoenix, as well as several in California, started requiring buyers to promise the homes would be their primary or secondary residences for at least a year.
In South Florida, such restrictions generally don't exist.
"We're seeing three times as many buyers as there are units," said Jack McCabe, a Deerfield Beach, Fla., development consultant, who says exuberant investors create artificial demand. "Three-hundred- and 400-unit buildings sell out in a weekend.
"In my very, very conservative estimate, 40 percent of these sales are speculator-driven, and in some projects, it's as high as 80 percent."
Today, some developers court investor interest, said Gail Liss-ner of Appraisal Research Counselors, which gathers data on residential construction.
At least one shuns them.
"Speculators are also our competition [when they resell], while I still may be trying to sell in my building," said Alan Lev, president of the Belgravia Group, a Chicago-area developer whose sales contracts require buyers to live in its buildings.
"Besides, our construction lenders are starting to look at [investor buyers] and say those are not good sales," he said.
Overall, the speculation picture is muddy because there is no single definition of "investor."
For example, vacation homes are investments in some databases, not others. Parents who buy condos to house children in college may not be trackable. Many investments are bought by landlords for the long term.
Or buyers are consumers who see bricks and mortar as an alternative to stock-market nosedives and wimpy returns on bank CDs. |
