Investors played "crucial role" in us property recovery
Photo credit: Michael Patrick
More than 100 forecasters said they expect large-scale investors to sell off the bulk of homes in the next three to five years, according to Zillow's latest survey.
The US site's report predicts that investors' selling of property will boost inventory on the market, which is currently low, and help to contribute a to "smoother market" ahead.
Indeed, after booming sales and price rises in the past year, rising mortgage rates and high values have seen sales slow down, as speculation cools in the face of domestic buyers climbing back onto the property ladder.
Throughout the recovery, large-scale investors have purchased thousands of homes nationwide, particularly lower-priced vacant and foreclosed homes, fixing them up and keeping them in their portfolios as rental properties. This investor activity helped put a floor under sales volumes during the depth of the housing recession, but also created competition for many would-be buyers and contributed to rapid price spikes in some areas.
79 per cent of the industry panellists surveyed said that the reduction of investors' inventories would have a significant or somewhat significant impact on the market, with 57 per cent saying they expected this to occur in the next three to five years.
"Real estate investors, both large and small, played a crucial role in helping to stabilize markets during the darkest days of the housing recession, but a decline in investor activity now isn't necessarily a bad thing, and could have real benefits for buyers," said Zillow Chief Economist Dr. Stan Humphries.
"Buyers entering the market in the next few months will not be competing with cash-rich investors like they were last year which should be some small solace given the higher prices and mortgage rates that they will encounter. The gradual decline of investor activity should be viewed as another sign of the market slowly returning to normal, and I agree with the panel's expectations that there will not be a rush for the exit by institutional investors."
Panelists were also asked when the Federal Reserve should end its ongoing quantitative easing. Since September 2012, the Fed has been purchasing tens of billions of dollars worth of Treasury bonds and mortgage securities each month, which has helped keep mortgage interest rates low and stimulate demand. The program is now being wound down.
"Mortgage rates have been riding a rally in U.S. Treasury securities caused by volatility in emerging markets in recent weeks, so the impact of Fed tapering on the housing market has been minimal thus far," said Pulsenomics Founder, Terry Loebs.
"More than 70 percent of the experts want to see the monetary stimulus reduced to zero before the end of this year, and the current pace of tapering will get us there. Of course, whether Janet Yellen's Fed will maintain the current pace as new economic challenges arise remains an open question."