Slowdown in Home Prices? Investor demand starts to wane! Not to worry, there is no Reason to Panic.
Nationally, home prices have risen nearly 12 percent from a year ago with even better returns here in SW Florida.
A slowdown in rising prices is expected soon, but when?
How much higher will prices go?
“Prices are still going to rise – just not as at brisk a pace as we’ve seen over the past year,” The Wall Street Journal reports. “This should calm down those pundits who have fretted over a new crop of housing bubbles.” According to a report by Goldman Sachs economists, home prices will likely moderate because they have returned to “fair value” and are no longer being viewed as “undervalued,” as they were for the past two years. Also, a rise in mortgage rates may cause some buyers to re-evaluate their options.
For the first time this year, buyer traffic dropped below agents’ expectations, and “the next few months will be crucial to determining whether this is just a pause or something more,” the Goldman Sachs report notes. Locally in Naples, most experts predict a brisk selling season with prices rising in the short term.
What’s more, the inventory of homes for sale in Naples will loosen as more sellers look to put their homes on the market. Those sellers, in turn, will then be looking to purchase another home, so prices will still likely continue to rise until new-home construction catches up. “With the improving underlying housing demand driven by household formation and economic recovery, we think housing activity will remain on an upward trajectory, despite occasional ups and downs along the way,” says the Goldman report.
In Naples, FL we expect listings to hit the market as we move into season; sales should be brisk. Let’s get ready now! Also, as the report notes, investors that were very active over the last 2 years will likely slow their purchases as the number of foreclosures dry up; this will give individual buyers more opportunity to buy into the market in 2014 season.
The proportion of investors involved in the housing market has fallen in the last few months. As their numbers dwindle, it may allow other buyers to step in, according to housing experts.
Investors have gone from accounting for 23 percent of home purchases in February to about 20 percent in June – the lowest level since September 2012, according to data from Campbell/Inside Mortgage Finance survey.
Their numbers will likely decrease even more in the coming year. About 48 percent of investors recently surveyed say they plan to lessen their home purchases over the next year, according to a recent survey by ORC International. Only 20 percent of the investors surveyed say they plan to buy more homes in the next year, a drop from 39 percent 10 months earlier.
“Investors helped stabilize a housing market that was in free-fall and they did so by taking advantage of fire-sale home prices,” says Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. “Now you see few fewer bargain prices in the market and that’s a reason investor demand is coming off its peak.”
In recent years, many buyers – particularly first-time homebuyers – may have lost out to investors’ all-cash offers on homes. Both banks and sellers may have been lured by the quick deal that cash offers typically provide over offers from buyers who require financing.
But with less competition from investors, some housing experts say this may allow an opportunity for other potential buyers to get into the market
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Source: “Analysis: Waning investor demand opens door for first-time U.S. home buyers,” Reuters
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