An unusual turn in direction in this week's Mortgage Matters!!
The Market Recap of Real Estate focuses on the mass purchases of properties by large investors(Blackstone Group noted) to hold as rental properties and the possible distortion in market direction. No doubt, the improvement in the market can be distorted by investors purchasing and holding property. Yet, this would only be true if there were not additional inventory for the non-investor to buy.
As Jim Belote notes below, the former bubble markets of California, Arizona and Florida have seen lots of Market Speculation which has fueled good recovery in pricing in these areas. The question that is posed is that is it time to take caution as a home buyer contract on his/her new home.
This may be a very valid question if one lives in one of these states or in a given market that has seen double digit recovery in prices in the past two year. Yet, this isn't a valid question for Hampton Road buyers.
In the Hampton Roads area encompasing Chesapeake, Virginia Beach, Norfolk, Portsmouth, Suffolk, Newport New, Hampton and up to Williamsburg/James county area as well as Northeastern North Carolina, we have seen a steady increase in values over the past three years in the 2% to 7%(last year) with a tightening of inventory. The tight inventory is not due to a large company picking up 100s or 1000s of homes to rent out such as Blackstone did in some other parts of the country.
Rather the shortage is due to buyers coming out to grab the 3.5% rates before they disappear while many sellers are on the fence about moving. The tight inventory will pressure home prices as buyers bid on homes; homes under $300,000 are already seeing multiple offers. Yet, a seller that needs to move may hit the double whammy of a higher value for his/her home coupled with higher interest rates.
If a $300,000 home increases to $310,000 and rates move from 3.5%, 30 year note to a still very good 4.5% rate, 30 year note, the buyer has to come up with $223.59 per month. For many buyers, this risk causes them to hit the market now. A very wise move indeed!!
Sellers need to respond as well to reap the increase buyer activity and not wait until the buyers pause because "the market" seems against them.