DS News - Digital Archives

INVESTMENT-HOME SALES DECLINE IN 2012 AS PRICES RISE Investment-home sales last year were down slightly from 2011 but remained elevated even as the median price climbed, according to a survey from the National Association of Realtors (NAR). Sales for investment homes totaled 1.21 million in the 2012 calendar year, down 2.1 percent from 1.23 million in 2011. Overall, investment sales accounted for 24 percent of all home sales in 2012. NAR says that's the second highest share since 2005. "Investors have been very active in the market over the past two years, attracted mostly by discounted foreclosures that could be quickly turned into profitable rentals," said Lawrence Yun, NAR's chief economist. "With rising prices and limited inventory, notably in the low price ranges, investors are likely to step back in coming years." The median price paid for investment homes increased 15 percent last year to $115,000, compared to $100,000 in 2011, NAR reported. Among the investment homes bought last year, 47 percent were distressed. The trade group's report shows half of investment buyers paid cash, and investors who financed their purchases provided a median downpayment of 27 percent. Investment buyers generally stayed close to home and bought properties that were a median distance of 21 miles from their residence. Thirtyfive percent bought more than one property. Just 6 percent of homes purchased by investment buyers last year have been resold, according to NAR. That's up slightly from 5 percent in 2011. Another 8 percent plan to sell within a year. "Property flipping modestly increased in in 2012," Yun said. "However, this isn't flipping in the sense of what took place during the housing boom. Rather, investors generally are renovating and improving properties before placing them back on the market to resell at a profit." Overall, investment buyers plan to hold their property for a median of 8 years, up from 5 years in 2011. More than half, or 55 percent, of investment buyers said they bought a home for rental income, while 30 percent wanted to diversify their investments or saw a good opportunity, and another 20 percent wanted to use the home for vacations or as a family retreat. NAR says the median age of investment buyers in 2012 was 45, and they had a median annual income of $87,500. REPORT: PRICES POST FIRST WINTER QUARTERLY GAIN IN 7 YEARS For the first time since 2006, national home prices survived winter without experiencing a quarterly decline, according to Clear Capital's market report for March. Home prices ended the month with a 6.5 percent year-over-year gain, while the quarterly gain was a modest 0.9 percent. "It has been seven years since home price growth continued throughout winter," commented Dr. Alex Villacorta, director of research and analytics at Clear Capital. "This is very strong evidence of the start to a new leg of the recovery, one that should give further confidence to consumers and lenders alike that the recovery is real." Over the next three quarters, Clear Capital is projecting growth of 1.7 percent, which would bring price gains for the full year of 2013 to 2.6 percent. On a regional basis, Clear Capital found quarterly growth was the strongest in the West, where prices were up 2.2 percent. The Northeast and South each saw prices grow 0.7 percent during the first three months of the year, while prices in the Midwest increased 0.3 percent. On an annual basis, the West also saw the strongest price gains at 14.5 percent. The South 44 experienced a 5.1 percent annual increase, followed by the Midwest, where prices rose 4.2 percent compared to last year, and the Northeast with a 3 percent year-over-year gain. According to Clear Capital's forecast, the Northeast will lead price growth over the next three quarters with a 2.1 percent gain. The Midwest and South are expected to experience a 1.9 percent and 1.8 percent increase, respectively, while the West will likely grow by just 0.7 percent, the company projects. "Recovering hard hit markets, like the West, could see buyer interest cool due to rising prices, while more fair market sellers might help boost supply," Clear Capital explained in its report. On a more microscopic level, data from Clear Capital found hard-hit markets such as Las Vegas, Phoenix, Atlanta, and Sacramento each posted quarterly price increases above 3 percent. While most major markets analyzed are expected to see upward movement in prices, small declines are projected over the next three quarters in three metros: Cleveland (-0.8 percent), Charlotte (-0.7 percent), and Cincinnati (-0.6 percent). SURVEY: INTEREST IN BUYING INCREASES AMONG YOUNG RENTERS Nearly two-thirds of the Millennial Generation, also known as Generation Y, is interested in buying a home, and it's not because they're tired of apartment living, according to a survey from homebuilder Pulte Group, Inc. The PulteGroup Home Index Survey (PGHI) showed 65 percent of renters between ages 18 to 34 with an annual income of at least $50,000 say their intention to buy has increased significantly or somewhat over the past year. The majority of millennials—52 percent—is interested in buying because they view a home as an investment and have a desire to own and build equity. Only 12 percent said the reason is because they have grown tired of living in an apartment. "Millennials have witnessed the housing boom and bust, but still believe homeownership is a good investment," said Fred Ehle, VP for PulteGroup. "Consistent with other third-party research that shows more than 90 percent of millennials plan to buy a home someday, we see a lot of young adults who are making financial sacrifices to afford a place of their own. With the combination of incredibly low mortgage rates, rising rental rates, and very low inventory levels, millennials realize now is a good time to purchase a home." Although many millennials are single, most aren't planning to reside in their home alone. According to the survey, 76 percent said they plan to live with a significant other, whether a spouse or girlfriend/boyfriend. Another 22 percent plan to live with friends or relatives. When looking for a home, 84 of millennial renters considered ample storage for daily items to be either extremely important or very important. Millennials also want to use their space for entertaining, with 76 percent categorizing space for TV, movie, or sports watching as extremely or very important. "Millennials today want a lot of value in their home that makes efficient use of every space. In fact, the single most important home feature to a millennial buyer today is the floor plan layout," Ehle noted. Other features viewed as extremely or very important were entry to the home (73 percent), outdoor living/deck (63 percent), and ability to conduct business from home (36 percent). The survey also found more than 90 percent of millennials use the Internet to shop for a home. KNOW THIS Completed short sales in February totaled 26,388, HOPE Now reports.

• Cover