Investors, Inventory Shortage Catalysts to Housing Rebound: Report
Demand for distressed properties from investors is contributing to the recovery, not creating an artificial one, according to Pro Teck Valuation Services’ Home Value Forecast(HVF) for April.
According to the report, one of the catalysts driving the housing market rebound has been large investment funds, which are buying distressed single-family homes to be used as rentals.
“These funds have also been renovating homes, which has helped to improve the overall conditions of the surrounding neighborhoods and provided a positive injection of capital,” said Tom O’Grady, CEO of Pro Teck.
Furthermore, the reduction in the supply of homes available for sale is also fueling positive home price reports. A year ago, Pro Teck boldly projected “the market was likely to turn much faster than anyone could imagine.”
“[N]ot only been realized, but also exceeded,” Pro Teck stated.
The real estate valuations company came to the conclusion after noting the number of new homes being built remained at historically low rates for more than five years, which would eventually lead to a shortage once demand returned. In addition, the declines in home values prevented many homeowners from selling, further reducing supply.
After observing a number of real estate cycles, Pro Teck also said that while each one may appear to be different, they all have one thing in common: a catalyst to propel movement.
“Once the cycle starts, a virtuous process of higher sales leads to higher prices which leads to more buyers coming into the market out of fear that they will miss out. At the same time, higher sales typically leads to a shortage of inventory available for sale except in those markets where new homes can easily be built,” Pro Teck explained.
However, the current real estate market also has two unique traits—very low mortgage rates and historically high levels of home affordability, according to the report.
The forecast report included a listing of the 10 best and 10 worst performing metros out of the top 200.
The ranking considers factors such as sales/listing activity and prices, months of remaining inventory (MRI), days on market (DOM), sold-to-list price ratio and foreclosure and REO activity.
Michael Sklarz, principal of Collateral Analytics and contributor to the HVF, noted five of the top markets are in California, while two are in Texas.
Meanwhile, Sklarz said the bottom metros are an “interesting mix, with two continuing to be in the upstate New York area and three in the Southeast.”
“All have double-digit Months of Remaining Inventory, however, many of the indicators are showing positive trends even for the bottom metros area this month,” he added.
Top Metros
- Santa Ana-Anaheim-Irvine, California
- Indianapolis-Carmel, Indiana
- Oakland-Fremont-Hayward, California
- Sacramento-Arden-Arcade-Rossville, California
- Los Angeles-Long Beach-Glendale, California
- Fort Lauderdale-Pompano Beach-Deerfield Beach, Florida
- Stockton, California
- Warren-Troy-Farmington Hill, Michigan
- Dallas-Plano-Irving, Texas
- Austin-Red Rock-San Marcos, Texas
Bottom Metros
- Cape Coral-Fort Myers, Florida
- Rochester, New York
- Baton Rouge, Louisiana
- Albany-Schnectady-Troy, New York
- Greenville-Maudlin-Easley, South Carolina
- Tampa-St. Petersburg-Clearwater, Florida
- Mobile, Alabama
- Little Rock-North Little Rock-Conway, Arkansas
- Shreveport-Bossier City, Louisiana
- Spokane, Washington
