In terms of recovery in Las Vegas—one of the crisis’ worst casualties—investors are leading the charge. The What Works Collaborative, an Urban Institute supported partnership aimed at creating and implementing evidence-based housing and urban policy, released a case study focused on four zip codes in the Las Vegas metropolitan area representing low to middle-level housing market subareas (based on price) within the larger region containing roughly 12 percent of the region’s population.

According to the study, the Las Vegas area has been one of the nation’s foreclosure hot spots since the collapse of the housing bubble, which was particularly pronounced in Sin City. Prices declined from the 2006 peak by roughly 60 percent, home construction came to all but a standstill, foreclosure starts were more than double the national average, and the great majority of owners in the area found themselves underwater. Investors began entering the market in large numbers late in 2008 or in 2009, and have represented roughly half the market since then. A ballpark estimate is that between 2009 and 2012 investors spent $25 billion acquiring single-family properties in the Las Vegas area.

Investors showed a pervasive presence throughout the study area, representing slightly more than half of all single-family transactions and two thirds of condominium purchases, typically purchasing properties slightly below the median price within each submarket area. Half of the investors recorded out-of-state addresses because of widespread use of local agents and representatives, particularly by overseas buyers. This significantly underrepresents the extent to which the Las Vegas area is drawing investors from out of the state, and from other countries like China. And, large investors aren’t leading the charge as expected. While there is evidence that ‘mega-investors’ such as Blackstone and Colony Capital have entered the market, they still have only a small market share.

Investors have adapted their strategies to keep pace with the shifting market conditions. The Las Vegas market has seen little predatory flipping or ‘milking’ of properties.

At the peak of the crisis ‘market-edge’ flippers, those who are able to sell the houses they buy for more than their cost by taking advantage of greater market knowledge or greater access to properties than other investors or homebuyers were common. As the market began to stabilize, and the disparity between REO and conventional transactions diminish, those investors largely left the market. Most of the properties coming on the market require little in the way of rehab, while property taxes are manageable at 1 percent of market value.

There is compelling evidence that the dramatic increase in real estate transactions in the Las Vegas market from 2007 to 2009 was investor- rather than homebuyer-driven, an increase that enabled the market to absorb an exceptionally high volume of inventory becoming available through foreclosure. That, in turn, meant that the widespread abandonment that was taking place at the same time in many other parts of the country affected by high foreclosure rates did not take place in Las Vegas. The study proposes that had investors not been ready to step in, it is unlikely that the market would have adjusted in anything like the same fashion; the probability that an equivalent number of would-be owner-occupants would have emerged during those years must be considered remote.

Investors played a critical role in stabilizing the market and preventing widespread abandonment, although it cannot be proven with certainty. What is becoming more evident is that it appears increasingly likely that investors have come to crowd out prospective homebuyers the study contends. This crowding out is not so much because investors are willing to pay more as the fact that, from a transactional standpoint, selling to an investor offers the seller-–particularly of an REO property-has clear advantages. As one informant summarized them, the investor will take the property ‘as is’, will not look for a warranty, and as a cash buyer, will close quickly and require neither appraisal nor mortgage contingencies.

However, there are drawbacks to such rigorous participation from the investor market. While investors are continuing to sustain the housing market, in the sense that they are continuing to absorb inventory at stabilized or rising price levels; the extremely high share they represent of the single-family market may be discouraging further stabilization of the market by keeping prices from rising more.

There is strong evidence that investors have played a constructive role in the Las Vegas market, but there is less clear-cut evidence that their continued domination of the market continues to be as constructive. Since the great majority of investors appear eager to maintain their properties so that they may be able to sell them for a profit in a few years, it is less likely that their properties will be neglected and become neighborhood problems. At the same time, to the extent that they are crowding out potential homebuyers, their effect could be problematic.