Posted by 101livescan on 3/9/13 10:27pm
Msg #460357
House Party?
Weekend Edition of National Mortgage News
Investors have been a major force in the housing recovery—buying REO for cash and turning the single-family homes into rentals.
Investors account for roughly 20% of existing home sales and private equity firms have gotten into the act over the past two years.
But economists at Wells Fargo Securities have noticed that the supply of “preferable distressed properties” is running thin and there could be pullback coming.
The “tell” is that some investors are purchasing homes directly from builders.
“We believe the recent interest in newly built homes by institutional buyers, mostly equity firms and pension funds, is a sign that investor purchases are topping.”
A pullback by investors, according to the WFS Housing Data Wrap-Up report, would make the market more reliant on traditional buyers that need mortgage financing.
So far, traditional “buyers are not coming back as strongly as the rebound in sales and home prices suggests,” the March 7 report says.
While it is difficult to gauge the impact in prices, the WFS economists say a “significant pullback by institutional investors would likely result in much smaller gains in median house prices.”
(For all of 2012, the median existing home price was $176,000, up 6.4% from 2011, according to the National Association of Realtors.)
But a pullback would have less impact on the S&P Case-Shiller house price index and the Federal Housing Finance Agency HPI.
Despite this note of caution, the WFS economics group expects continued improvement in sales, prices and new home construction this year. “We had previously felt that most of the risks to our forecast were to the upside, however, and now feel the risks are more balanced.”
But over at Bank of America Merrill Lynch, the analysts see nothing but blue skies. The housing market is gaining momentum and house price gains could be up 8% by yearend. That would top the 7.3% gain in the national S&P Case-Shiller HPI in 2012.
“We believe a positive feedback loop has begun, where the rise in prices fuels expectations of further appreciation and easing credit conditions, which in turn stimulates home buying,” the analysts say in the March 7 report.
They note that increasing demand for housing and the low supply of homes for sale will keep prices moving up. The title of the B of A/ML report is “Someone Say House Party?”
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