Investors Home Buying Binge Rages

By Mike Colpitts

Investors accounted for almost 1 in 4 home purchases during the month of January, up to 23% of purchases, demonstrating that the price reduced home buying binge by investors is controlling a large portion of the U.S. housing market as bargain hungry investors attempt to cash in on deals.

The figure was up 2% from December numbers provided by the National Association of Realtors monthly home sales report, but showed that the market is still exhibiting weakness in most regions of the country. Existing home sales rose for the month, 4.3% to a seasonally adjusted annual rate of 4.57 million.

Home purchase contracts continue to dog the market, with 33% of all Realtors surveyed saying they experienced a failed contract in January. Rigid mortgage qualification standards imposed following the financial crisis by banks and new underwriting criteria for appraisers are contributing to failed sales.

A Housing Predictor survey taken over the past three weeks showed strong evidence of pent-up buying demand for housing, with 72% polled saying they want to buy homes. However, 33% or one-in-three home purchases handled by NAR members were to first time buyers in the month of January, indicating that many homeowners who want to move are unable to do so without walking away from their mortgages.


A lack of home equity and rigid mortgage lending standards harness the housing market from reaching a recovery in most areas of the country. However, home sales are showing some improvement. Sales jumped 8.8% for the month in the West. The South saw existing sales rise 3.5%. Northeast sales moved 3.4% higher, but troubled by colder weather the Midwest saw sales rise only 1% for the month over December.

Home prices are still declining in just about every area of the U.S. but are moving higher in some isolated markets in the Midwest, including Kansas and Nebraska cities. Home values are also improving in North Dakota, South Dakota, Wyoming and Vermont, which were less effected by the real estate crash than most of the rest of the country.

“Word has been spreading about the record high housing affordability conditions and our members are reporting an increase in foot traffic compared with a year ago,” said NAR president Moe Veissi. “With other favorable market factors, these are hopeful indicators leading into the spring home-buying season. We’re cautiously optimistic that an uptrend will continue this year.”

In Veissi’s home market of Miami, Florida home and condo sales are on an upward trend, and have been for more than a year, with condo and home values rising in Miami, but most home prices throughout the rest of Florida are still falling.

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