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» VISIT US ONLINE @ DSNEWS.COM FIRM FORECASTS 8% INCREASE IN PRICES, DECREASE IN MORTGAGE RATES The pace at which home prices are rising should moderate later this year, with home prices forecast to rise by 8 percent this year, then increase by another 4 percent in 2014, according to Capital Economics. Although the research firm agrees with analysts who have warned recent home price gains are not sustainable, Capital Economics described housing bubble concerns as "premature." In the firm's housing report for Q2, economists Ed Stansfield and Paul Diggle wrote, "The bottom line is that valuation and affordability metrics suggest that house prices can rise considerably further before we need to begin worrying about another housing bubble forming." According to the firm, housing is actually undervalued by about 16 percent. Capital Economics also waved off concerns regarding rapid price increases in Miami and Phoenix, noting metros where prices dropped the furthest are seeing the biggest gains, and overall, prices "almost everywhere" still have a ways to go before reaching "bubble-era highs." Unlike other projections, the firm also doesn't expect to see a swift increase in mortgage rates over the next year. "In fact, our central view assumes that another flareup in the euro-zone crisis prompts renewed safe-haven demand, resulting in a decline in Treasury yields and mortgage rates later this year," the report stated. As for the rental sector, the firm projects rental returns will peak in 2013 and forecasts yields will average 8 to 10 percent over the next few years. However, the firm expects the owner occupant market to strengthen and for demand in rents to weaken, with increases in rents ranging between 2.5 and 4 percent. Capital Economics also offered predictions for existing-home sales, forecasting sales will reach 5.1 million this year and then rise to 5.3 million in 2014. RISING PRICES LEAD TO FEWER INVESTOR PURCHASES, LONGER HOLDING TIMES A recent industry survey found rising home prices are impacting investor activity in a few ways—most notably encouraging them to hold properties longer and to decrease their purchase activity. The survey, conducted by ORC International and released by MemphisInvest.com and Premier Property Management Group, revealed more than half of investors plan to keep their investment properties for five years or more. One-third said they will keep them for at least 10 years. Investors in these categories "realize the benefits of rising rents and low vacancy rates," according to Chris Clothier, a partner at MemphisInvest.com and Premier Property Management Group. "Cash flow is much more important than appreciation," Clothier said. Close to half—48 percent—of the investors surveyed in May said they will purchase fewer properties in the next 12 months than they did in the past year. This is up from 30 percent in the same survey conducted in August 2012. Twenty percent of survey respondents said they will purchase more properties in the next 12 months than in the previous 12 months, down from 39 percent in the August survey. Contributing to this trend, "[f]ewer foreclosures, rising property values, and competition from hedge funds are making it tough to find good deals on distress sales," Clothier said. Rising prices are also affecting the method by which investors pay for their properties, according to Clothier. Thirty-seven percent of investors said they will pay cash for their next property, up from almost 25 percent in the previous survey. "Cash sales make sense when prices are rising. They lower investors' costs," Clothier said. The increase in institutional investor activity may appear to be a hurdle for private investors, but the survey revealed a minority of investors—13 percent—have noticed an impact. Are you struggling with poor BPO quality? There are 4 reasons why we've been a leader in the valuation industry since 1995 » Exceptional QC Processes » Experienced Vender Panel/ Developed over 20 Years. » Completely Customizable Solutions. » Outstanding Customer Service. STAT INSIGHT 4,569,000 Properties 30+ days delinquent or in foreclosure as of the end of May. www.AssetVal.com 800-560-7350 ext. 114 Source: Lender Processing Services 33

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