The summer months are usually stronger for home prices historically, due to the mix of homes that are selling and families can move without disrupting children in school. What is currently playing a strong role is this combination of investor activity in the market and supply, both of which have been falling. Listed inventory in July was down nearly 24 percent from a year ago, according to the National Association of Realtors. Investor activity in the market fell to 21.9 percent of all transactions in July, according to a new survey by Campbell/Inside Mortgage Finance. That’s down from 23.5 percent in June and a two-year peak of 25.3 percent in May. There are dozens of reports suggesting that the housing problem is just about over. But don’t get too excited just yet.
Real estate agents responding to the HousingPulse survey indicated that recent price increases caused the sharp reversal in investor interest. “Investors are dropping out due to the increase in prices,” reported an agent in California. “Prices are too high here for investors,” added an agent in Massachusetts.
Thomas Popik, research director for Campbell Surveys, claims the drop in investor share is not just due to a rise in overall home sales and fewer distressed sales. “Overall home buyer demand and home price appreciation is being driven by historically low interest rates,” Popik said. “But savvy investors are the canaries in the coal mine—they are warning that if rates rise, the high proportion of distressed properties could once again push home prices down.”
Foreclosures have been falling steadily, with 58,000 completed in July, down from 69,000 in July of 2011, according to CoreLogic.
“Completed foreclosures were down again in July, this time by 16 percent versus a year ago, as servicers increasingly rely on alternatives to the foreclosure process, such as short sales and modifications,” said Mark Fleming, chief economist for CoreLogic.
Given the unprecedented nature of the recent housing crash, there is not a lot of historical perspective to help us gauge if this is in fact a real recovery in home prices or a temporary bump due to a slowdown in distressed supply and a pull-back by investors. Seasonal factors will likely come into play in the fall, tempering home price gains.
There is still too much noise in the numbers, however, to draw any firm conclusions yet. Nearly 12 percent of all homeowners with a mortgage are either delinquent in their payments or already in the foreclosure process, according to the Mortgage Bankers Association.
Banks are still sitting on thousands of already-foreclosed properties, while the government looks to unload even more foreclosures through bulk deals. Record-low mortgage rates are beginning to rise again, and new rules governing the mortgage market that could further affect those rates are in the works.
The big firms who report the media use national average numbers but national averages just don’t work, says John Callahan with 360 Group who helps people re-negotiate debt. “Just here in Arizona, we have three distinct markets. Scottsdale has already eclipsed the heights of 2006 on some homes, while other areas like Buckeye are still around 2002 levels, Callahan says. “You just can’t use averages. It makes no sense because each area is it’s own microcosm”.
The market will ebb and flow and people will either pay to live in a home they want or not. And that will drive prices up or down. It’s been this way since the beginning and it will never change. The key is doing your research to look at the history of the home you want to buy. The history will tell you if you are paying too much.
360 Group – 17470 N Pacesetter Way, Scottsdale, AZ 85255