August 30, 2011 (Jeff Alan)

The struggling housing market is forcing investors to change their business model from buying homes and flipping them for profit to buying homes and renting them out according to the latest Campbell/Inside Mortgage Finance HousingPulse Market Survey.

Many of the same economic realities that home sellers are facing today have bestowed the investor market. The inability of investors to resell homes in the current market, even at the discount prices that many buy homes for, has reduced their level of participation in the housing market.

Investors accounted for only 19.6 percent of purchase transactions in July, down from a 23.0 percent market share as recently as April with July’s activity at the lowest levels seen in the last twelve months.

Campbell Surveys estimates that in the month of July, 48 percent of the properties acquired by investors will ultimately end up as rentals compared to 28 percent in July of 2010.

First time homebuyers made a slight comeback in the market in July, scooping up 36.9 percent of the homes sold. That was up from 35.4 percent in June.

Distressed property sales also increased in July accounting for 46.2 percent of purchase transactions compared to 44.7 percent in June.

The gap between first-time homebuyers and the distressed property supply was 9.3 percentage points in July which was unchanged from June. The difference in the gap is important because unlike current home owners who are move up and move down buyers and thus don’t absorb any housing, they’re just trading a house for a house, first-time homeowners absorb housing supply and when the supply of distressed properties exceeds the demand from those first-time homebuyers, investors will step into the market and purchase the excess housing inventory at discount prices, which puts further downward pressure on home prices.

Real estate agents who responded to the July survey indicated that the debt ceiling debate negatively affected home buying activity in July with buyers feeling uneasy about purchasing homes at the time.

Tags: Campbell/Inside Mortgage Finance, HousingPulse Tracking Survey, Distressed Property Index, distressed properties, first-time homebuyers, distressed properties, investors

Campbell/Inside Mortgage Finance