2014 Means Less Competition for Home Buyers

This article from Zillow says home buyers should have less competition and an easier time finding their dream home as investors step back and the home shopping season begins to heat up.

The latest Zillow Home Price Expectations Survey, which surveyed 110 economists, real estate experts and investment and market strategists, found that investors who bought up lower priced and foreclosed homes throughout the recovery—are expected to take a step back—leaving room for buyers eager to purchase new digs.

What this means for home buyers is that the level of competition will most likely ease up a bit.

“Buyers entering the market in the next few months will not be competing with cash-rich investors like they were last year, which should be some small solace given the higher prices and mortgage rates that they will encounter,” said Zillow Chief Economist Dr. Stan Humphries.

Investors and the Housing Recession

In the midst of the housing recession, when few home buyers were still active in the market, investors bought thousands of homes around the country, fixing many of them up and stockpiling them in their portfolios as rental properties—keeping them off the market for potential home buyers.

This activity helped put a floor under sales volumes. But as the recovery continued, investor demand created competition for many would-be home buyers, contributing to rapid price increases in some areas.

“Real estate investors, both large and small, played a crucial role in helping to stabilize markets during the darkest days of the housing recession, but a decline in investor activity now isn’t necessarily a bad thing, and could have real benefits for buyers,” said Humphries.

Humphries explained that the gradual decline of investor activity should be seen as another sign of the market slowly returning to normal. However, he agreed with the survey panelists that there wouldn’t necessarily “be a rush for the exit by institutional investors.”

However, panelists said they expected an average home value appreciation of 4.5 percent nationwide through the end 2014, a pace that surpasses historically normal annual appreciation rates of around 3 percent.

Based on the current expectations for home value appreciation over the next five years, panelists predicted that overall U.S. home values could exceed their April 2007 peak by the first quarter of 2018, and may even cross the $200,000 threshold by the third quarter of 2018—which is not too far off.