Property investors down in us

Photo credit: Michael Patrick

The number of property investors has fallen in the US, according to the National Association of Realtors. After four months of price rises in a row, existing home sales slipped in August 2014, as investors paying in cash retreated from the market.

Sales increases in the Northeast and Midwest, but were outweighed by declines in the South and West, taking the total number of transactions down by 1.8 per cent  from July 2014. Sales are now at the second-highest pace of 2014, but remain 5.3 per cent below the 5.33 million-unit level from last August, which was also the second-highest sales level of 2013.

Lawrence Yun, NAR chief economist, says that while sales activity is stronger than earlier this year, investors are stepping away from the market.

Indeed, all-cash sales made up 23 per cent of transactions in August, dropping for the second consecutive month and representing the lowest overall share since December 2009 (22 per cent). Individual investors, who account for many cash sales, purchased 12 per cent of homes in August, down from 16 per cent last month and 17 per cent in August 2013.

Investment has driven sales in America in recent years, helping to reduce the housing inventory by 1.7 per cent to 2.31 million existing homes in August and pushing up house prices for the 30th month of year-on-year price gains in a row; the median existing-home price2 for all housing types in August was $219,800, 4.8 per cent above August 2013.

Now, though, US property only accounts for 10.38 per cent of all enquiries on TheMoveChannel.com, down from  27.26 per cent 12 months ago.

While the exit of investors occurs as unsold inventory climbed 4.5 per cent higher than a year ago, when there were 2.21 million existing homes available for sale, the decline in overseas demand is good news for the US market, says NAR President Steve Brown, co-owner of Irongate, Inc., Realtors in Dayton, Ohio.

Brown argues that it is good for the market, creating more opportunity for buyers who rely on financing to purchase a home. The percent share of first-time buyers remained unchanged in August from July at 29 per cent. First-time buyers have represented less than 30 per cent of all buyers in 16 of the past 17 months. With investors shrinking away, the market is opened up for those who were previously unable to buy.

"On the positive side," agrees Yun, "first-time buyers have a better chance of purchasing a home now that bidding wars are receding and supply constraints have significantly eased in many parts of the country."

Yun adds: "As long as solid job growth continues, wages should eventually pick up to steadily improve purchasing power and help fully release the pent-up demand for buying.”