We long for a return to a normalized mortgage and housing market; that is, a market before the housing boom and bust. We certainly aren't there on the mortgage side, where a normalized market would be characterized by higher lending rates, more private-market participation, and less-restrictive lending practices.

Housing is a different story. We thought we were moving toward normalization, where owner-occupied buyers' share of the market was growing. It appears we jumped the gun.

The latest data from RealtyTrac show investors are still very much in force. Institutional investors, in particular, remain a major market player. Institutional investors – REITs, private equity, and hedge funds – accounted for 14% of all sales in September, up from 9% in August. Their activity is reflected in the percentage of all-cash purchases, which represented 49% of all residential purchases in September, up from 40% in August.

Of course, we have nothing against investors, but institutional investors are a new phenomenon. In the past, investors in the single-family rental market were primarily individuals or small partnerships. In recent years, billions of dollars of institutional money has flooded the market.

Institutional investors have certainly impacted prices. We suspect their money has also lead to increased price volatility. This is something to consider should you read of institutional money entering or leaving your particular local market. When institutional money enters a market, prices can move meaningfully higher. And the opposite is true when it leaves – prices can move meaningfully lower.

Courtesy of Jessica Regan.

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