What’s happening on the low end of the real estate market

This may help explain what’s happening in the low end of the market –

Press Release: February 26, 2013  – Strong Homebuyer Traffic, Rising Home Prices Fail to Lift Market for Damaged REO, New HousingPulse Survey Finds
WASHINGTON, DC (February 26) – Strong homebuyer traffic and limited housing inventory continued to push overall home prices upward in January. But the latest Campbell/Inside Mortgage Finance HousingPulse Tracking Survey results also reveal a growing divergence between prices for non-distressed properties and prices for damaged real-estate owned or REO. (Ed. – I am definitely seeing this trend in the markets that I cover.)
While HousingPulse data shows that home prices overall, based on a three-month moving average, are at the highest level – $236,100 – seen in nearly three years and have been climbing since last spring, those average numbers don’t tell the complete story when it comes to home price trends. (Ed. – See the sold homes data at www.movetomilford.com for the average and median sale prices in the nine markets that I cover.)
Yes, home prices are on the rise for non-distressed properties, which accounted for 65.0 percent of total home purchase transactions tracked by HousingPulse in January. In fact, average home prices for non-distressed properties were up a healthy 5.1 percent on a year-over-year basis – rising from $264,700 in January of 2012 to $278,200 in January of 2013. (Ed. – Again, these are national averages. See my local data for the averages here.)
But no, home prices for REO properties in need of repair – the type banks look to unload after a foreclosure – have not been rising along with prices for non-distressed properties. They have been moving in the opposite direction.
According to HousingPulse results, the average price for a damaged REO property sold in January was just $88,100. That was not only 17.1 percent below the average damaged REO price recorded a year ago – $106,300 – but also the lowest level ever recorded by HousingPulse in its four-year history.
One reason for the decline in home prices for damaged REO is the fact that both current and first-time homebuyers have reduce their interest in this type of property for the better part of the past year. HousingPulse results for January show current homeowners with a record low 15.0 percent share of the damaged REO purchase market, while first-time homebuyers had a near-record low share of 19.6 percent. (Ed. – I have definitely seen this locally. More first time buyers are passing on fixer-uppers and going for move-in ready homes.)
Meanwhile, investors, lured by low prices and the growing opportunities for flipping, have significantly increased the purchase share of damaged REO properties in recent months. During January, investors accounted for 65.4 percent of damaged REO home purchases, according to HousingPulse numbers. That was up from 58.1 percent a year earlier and the highest level recorded in the survey’s four-year history. (Ed. – In this area we are also seeing cash rule the lower end of the market. Basically anything under $150,000 is going for cash and many have multiple cash bids.)
The Campbell/Inside Mortgage Finance HousingPulse Tracking Survey involves approximately 2,500 real estate agents nationwide each month and provides up-to-date intelligence on home sales and mortgage usage patterns. For more information on the survey, contact John Campbell at Campbell Surveys at (202) 363-2069 or jcampbell@housingpulse.com.
Ed. – So now you know for sure that it wasn’t your imagination. The market at the low end has shifted mainly to investors with cash offers. And the prices at that end have actually declined for damaged houses, rather than rise with the overall market.
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