Investors Help Drive Home Prices Up 10.9%

Investors Help Drive Home Prices Up 10.9%

In March, home prices increased 10.9% from last year at this time but are still down 28% from 2006 levels.

Analysts say one key driver for the uptick in home prices is not individuals buying homes but rather large investor groups swooping in to snatch up homes that can be rented to families and individuals who lack either the credit or capital to buy a house of their own.

Last month, for example, Five Ten Capital brokered a $100 million deal with Deutsche Bank to launch a new fund to buy and manage single family rental homes. Five Ten Capital CEO Rob Bloemker says it’s just the start of a big trend in the housing market.

“We’re just at the beginning of institutional sponsorship,” Bloemker told CNBC.  “I think you’re going to have five to ten companies come out of this managing five to ten billion dollars worth of homes.”

Large investors are also examining strategies that include new home constructions.

Smaller real estate investors, who buy distressed properties and then rent them or “flip” them to other investors or individuals, are also helping fuel the rise in home prices. In the first four months of this year, 6,000 California homes were flipped–the highest levels since 2005.