June 21, 2011 (Chris Moore)
The Spring/Summer selling season, which has already gotten off to a sputtering start, may take a downward turn in the coming months according to the latest Campbell/Inside Finance HousingPulse Tracking Survey as homebuyer traffic tumbled in May.
Data from the survey shows that the index for first-time homebuyer traffic dropped to 45.3 in May from 51.7 in April. In addition, the traffic index for current homeowners dropped to 44.8 in May from 51.6 in April.
An index value of less than 50 indicates a decrease in traffic. In the prior three months, the index for both first-time homebuyers and current homeowners had been above 50, indicating an increase in homebuyer traffic.
The proportion of first-time homebuyers increased from 35.7 percent in April to 37.3 percent in May, while investors accounted for 21.6 percent of the housing market in May, which was down from 23.0 percent in April.
The Survey’s Distressed Property Index (DPI) fell to 46.7 percent in April, although distress property sales still accounted for nearly half of the homes on the market.
The gap between first-time homebuyers and the distressed property supply declined to 9.4 percentage points in May compared to 12.0 percentage points in April. 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.
“The fall in homebuyer traffic indexes and other data show that this spring-summer home-buying season will be significantly below last year’s,” said Thomas Popik, research director for Campbell Surveys. “First-time homebuyers have difficulty getting mortgage financing and current homeowners are often locked into properties with negative home equity. That leaves investors to take up the slack.”
The survey found that 74 percent of the purchases made by investors were made by cash, but as more investors move away from flipping their properties to a hold-and-rent strategy, their sources of personal funding that are used to purchase homes for cash was drying up, which will force them to rely on bank financing that many have limited access to.
Tags: Campbell/Inside Mortgage Finance, HousingPulse Tracking Survey, Distressed Property Index, distressed properties, first-time homebuyers, distressed properties, investors, bargain basement prices
Campbell/Inside Mortgage Finance