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Investors who have been snapping up foreclosed homes are backing off in the wake of the U.S. foreclosure fiasco, driven off by sagging inventory and fears over legal title. Some economists say the trend could hurt the overall housing market.
With foreclosed properties accounting for a large portion of housing sales, and investors accounting for a large portion of buyers — particularly in some key markets with very high foreclosure rates — the implications for the broader economy could be serious.
Investors who would buy, rehabilitate and then sell or rent foreclosures were playing a "huge role," in helping to clear the market, said housing economist Tom Lawler.
But many of those investors are now staying on the sidelines.
"We're like a plane flying around in a holding pattern, waiting to land," said Tony Alvarez, an investor in southern California who is currently renting out 40 former foreclosed homes. "Nothing is going on, and why? Fear has taken hold in the marketplace."
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