Direction Market Is Heading: Are Investors Artificially Driving Up Prices?
Existing home sales up 6% to 4.97 million month over month and up 9.7% year over year (NAR)
Distressed sales are down 10% year over year. First time buyers are down and cash buyers are up both month over month and year over year. this tells us most homes today are not being purchased by average buyers....investors are driving the market.
Last month inventory was at a low 4.7 months supply. Listed inventory is 13.6% less than this time last year when it was 6.6 months supply. And last year prices rose 10 to 11% on average (Case Shiller). Additionally, interest rates are artificially low. Rising prices and low inventory is not unlike the recipe that drove the bubble that lead to our Great Recession. But there are signs this is waning...
This month inventory rose to 11.9%, 2.16 million or 5.2 months' supply. But the even bigger news is that we know there are almost 4 million vacant units are being held off the market. With the robo signer and OCC settlements working their way through, an estimated 2 million zombie foreclosures are ramping up again. Another 6v million are in default and 13 million underwater (a total of 20 million lack equity to sell and buy again if they waned to) and folks who bought at or near the bubble now have homes still worth about a third less than they paid for them. All of these buckets are considered potential foreclosures in waitingwhich can potentially increase and drive prices down by virtue of the added supply as well as the 15 to 50% low prices distressed homes have historically sold for. One other factor is as banks meet their obligations under the settlements they may be less likely to grant short sales and we may see more inventory.
And price increases seem to be slowing, rising only 1 to 1.5% in Q1 2013 or about 4 to 5% for the year, a trend many believe will contimue through 2017.