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Investors Swarm Housing, Raising Concerns
CNBC.com | March 29, 2012 | 11:11 AM EDT

The number of homes sold to investors more than doubled last year, as rising rents and low-priced distressed properties fueled demand. Investors, half of them using no mortgage, bought 1.23 million homes in 2011, a 65 percent jump from 2010, according to the National Association of Realtors. Half of the homes purchased were distressed properties, that is, foreclosures or short sales (when the bank allows the home to be sold for less than the value of the mortgage).

“Rising rental income easily beat cash sitting in banks as an added inducement,” says NAR’s chief economist Lawrence Yun. “In addition, 41 percent of investment buyers purchased more than one property.”

Half of investment buyers said they purchased primarily to generate rental income, according to the Realtors’ report. 34 percent wanted to diversify their investments, as 2011 saw a volatile stock market due to the debt crisis at home and overseas.

While nearly half of investment buyers said they were likely to purchase another property within two years, housing and mortgage analyst Mark Hanson calls them a “thin cohort” and worries that they add ever more volatility to the current housing recovery.

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