Individual buyers, particularly first-time buyers, are having a tough time competing with investors in the single-family home resale market.
Investors Playing Increasingly Large Role in Resale Market
A new survey of over 6,000 real estate agents in 497 markets from John Burns Real Estate Consulting titled The Burns Resale Housing Market Index indicates that cash buyers, likely investors, are, according to CEO John Burns, “…playing a very big role in the market particularly below the $300,000 price range.”
Burns said, “The commentary (from agents) over and over again was that entry-level buyers are losing out to cash buyers, which when you look at these comments, it’s investor activity. Cash is king. VA and FHA buyers who need a mortgage and need the appraisal to come through are struggling.”
Burns said that his firm was one of the first to “…sound the alarm in 2004 of just how much investor activity was going on in Fort Myers, Las Vegas, Phoenix…” and other markets.
Survey Indicates Market Imbalance between Supply & Demand to Continue
Based on index scoring, the Burns Resale Housing Market Index, RHMI, “opened” at 75.5 out of 100 when the survey was initiated. This 75.5 index score means that the resale market of existing single-family homes is still expanding due to demand.
In July, the resale home sales pace was slightly “better than normal” with an index score of 65. However, this resale home sales pace is forecast to rev up over the next six months to affect a resale home sales index score of 83.1.
Yes, the market imbalance between supply and demand is expected to continue as cut-throat competition and bidding wars are expected to continue. (In July, Burns Real Estate Consulting found that 59% of all contracts nationally received multiple offers.”
Investor Activity Unlikely to Go Away
The Burns’ firm currently has eight or more clients who are purchasing at least 500 single-family homes a month with the goal of converting those homes into single-family rental properties. These clients hope to generate at least $1,500 – $2,500 per month per each converted rental property.
Burns said that even an increase in inventory would not tip the scales in favor of individual buyers. He thinks that more inventory would simply encourage more investors to get in the game and/or increase their buying capacity.
Thanks to Inman.