The housing crisis and the Great Recession were painful for many homeowners, but it provided a windfall for institutional investors. Investors with sufficient funds were able to scoop up foreclosed and devalued homes at bargain prices. Many of these homes only required maintenance and not the extensive renovation that often occurs in the foreclosure/distressed home market.

Fast forward to 2015 and the situation is considerably different. Single-family home investment is shifting toward the smaller investor holding only a few properties. According to RealtyTrac, which defines institutional investors as entities buying more than ten homes at a time, only 3.4% of home sales in the first quarter of 2015 were from institutional investors. That is nearly half of the 2014 pace and the lowest quarterly purchase rate in four years.

Smaller investors, or "non-occupant buyers," accounted for 36.8% of the single-family home sales during that same time period. That represents the largest share of non-institutional investment buyers in four years.

The New York Times noted the transition in 2014 as private-equity-driven groups like Waypoint and the Blackstone Group changed their emphasis from buying foreclosed homes to maintaining and selling them. Home prices increased and institutional investors harvested the low-hanging fruit of the best properties in the best locations, prompting the shift in focus.

These circumstances force the non-institutional investors in single-family starter homes to move away from larger urban areas and toward mid-sized cities with a strong demand, and relatively affordable investment properties that are not in need of extensive remodeling. The remaining institutional investors are hitting these same markets, potentially squeezing out smaller investors — as well as first-time homebuyers who are looking for an affordable starter home.

Where are these markets located? Looking at sales during the first quarter of 2015 in metro areas with at least 500,000 people, Memphis had the highest share of institutional investor purchases of single-family homes (18.3%). North Carolina was well represented with Charlotte in second place at 15.3% and Raleigh in fourth at 10.5%. Atlanta came in third at 11.3% and Oklahoma City rounds out the top five with 9.3%.

The numbers in Memphis, Charlotte, and Raleigh represent increases from the previous year. Other markets that are showing increases in the percentage of institutional investment purchases include Detroit; Madison, WI; Greensboro, NC; and Ogden and Provo, UT.

Daren Blomquist, RealtyTrac vice president, emphasized the shift to different local markets as institutional investing in homes overall continues to decline. According to Blomquist, "There were 35 zip codes where at least 50 single family homes were purchased by institutional investors in the fourth quarter (2014) with institutional investor purchases representing from 17% to 74% of all single family home sales in those zip codes."

This scenario explains part of the recent difficulties in the housing market. While there may be plenty more rentals on the market thanks to single-family investment purchases, there is a limited inventory of starter homes for sale to resident families. Unfortunately, with rising home prices and building costs, builders do not target the necessary single-family starter homes. It is difficult to make money from it; therefore, builders have gravitated to the high-end market or government-subsidized affordable housing.

Whether you are an investor or just looking to buy your first home, the message is that preferable properties in desirable areas are hard to find, and depending on where you live, they may not exist at all. If you find a suitable property, strike while you can, and while interest rates are still relatively low.

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