Housing Development

Large scale real estate owners are reselling at a lower rate than their small scale counterparts.

Large real estate investors are not selling their houses, despite seeing sizable gains.  Check out the full story from Forbes here.

RealtyTrac recently analyzed 600,000 purchases made between January 2011 and September 2013, and found that real estate investors who purchased more than 500 properties, sold a small proportion of those properties – only 5 percent. This is compared to investors who made between 100 and 499 purchases, who sold off 19%, and investors who made between 10 and 99 purchases, who sold off 29%. All these properties increased in value by around 20%. So why did the small investors re-sell more?

One reason could be that those who own a smaller number of property value the cash more now than later. It could be the personality of small investors to enjoy their money now, while larger investors would rather accumulate it for the future.  It’s also possible that smaller-scale investors are looking to put their capital into higher return ventures since making a profit on real estate can be a slow process.

Another reason could be that the small investors have fewer properties to inspect, and so they have a better idea of what they can sell off before it loses values. It’s easier to analyze 100 properties than it is to analyze 500.

We can change the question to “Why did the big investors re-sell less?”

Maybe it’s psychological. Losing value on one house out of 500 probably does not feel as bad as losing value on one house out of ten. So big investors are less likely to sell off risky property.

Maybe it’s statistical intuition. Maybe big investors feel more confident about the trend of rising home prices because their real estate intuition is based on a larger sample size. They see a trend in what smaller investors think is luck.

One thing is clear though: having more property will change your behavior in real estate.