Investors Start to Evacuate the Housing Market

24 July 2013

The recent housing activity was fueled with a frenzy of buying from investors. Deep-pocketed buyers grabbed homes left and right, driving prices faster than normal. Now with prices reaching new highs after continuous surge in demand coupled with a jump in mortgage rates, the same investors are beginning to pull back.

According to the National Association of Realtors, investor activity only accounted for 15 percent of the total sales in June. Homeowners are now starting to enter the market again with renewed confidence as investor numbers fall for the fourth straight month. Still, higher prices are expected with the ever-looming tight inventories.

During the peak of the foreclosure crisis, investors made up of more than a third of the buyers. They were mostly focused on the West, the hardest hit. This caused as much as 20 percent increase in the prices but the levels were nevertheless still a long shot from a boom.

Due to the lack of supply, the market has become consistently competitive especially for first-time buyers, who only accounted for 29 percent of the total number of buyer sin June. These buyers found it difficult to purchase a property since a majority of them need financing and can only afford smaller down payments.

Yet even with the slowly decreasing number of investors, cash sales are dominating the market. As much as 31 percent of the total sales in June were all made in cash.