Posted on Tuesday, December 21, 2010
Rising mortgage rates helped push first-time homebuyers to buy properties in November, while investors lost some of their enthusiasm for distressed properties last month. These are two of the major findings of the latest HousingPulse Tracking Survey released by the market research firm Campbell Surveys Monday.
The company found that first-time buyers’ share of home purchases jumped from 34.4 percent in October to 37.2 percent last month as long-term mortgage rates started to climb from the record lows set in early November.
Meanwhile, investor activity continued a two-month decline, falling from 21.4 percent of home purchase transactions in October to 19.9 percent in November, according to the survey results. During September, investor participation peaked at 22.3 percent, a 15-month high.
Separately, the share of home purchases made by existing homeowners also fell in November, going from 44.2 percent in October to 42.9 percent last month, Campbell Surveys reported.
“The recent surge in interest rates has made potential homebuyers nervous,” explained Thomas Popik, director of the HousingPulse survey. “If rates go up much more, then a good percentage of them will no longer qualify for the properties they want. As a result, they’re making bids on homes and quickly closing before their rate locks expire.”
Real estate agents responding to the latest survey commented on the rate-induced surge of homebuyer interest. “First-time buyers are back looking at homes,” reported an agent in Oregon.
“Interest rates have helped spur recent activity,” added an agent in Colorado.
Current homeowners, many of whom must sell their current residence to purchase another, are often precluded from quickly closing on properties, Popik noted, in explaining their reduced share of home purchase transactions in November.
Campbell Surveys found that not all types of property sales were impacted by the recent rise in mortgages rates – namely short sales, which require many months to obtain mortgage-servicer approval.
“Homebuyer concern for locking in interest rates while rates are low caused them to bypass short sale listings,” commented an agent in Hawaii.
“Most people are not prepared to wait for a short sale to settle…Buyers are concerned that interest rates are rising and don’t want to take a chance by agreeing to settle 5 or 6 months in the future,” wrote an agent in Virginia.
The large inventory of distressed properties is making investors nervous that prices will decline in 2011, Popik reported, adding that many investors see their previous business model – buy, rehab, and immediately sell – becoming increasingly difficult to execute and are now being forced to rent their properties.
“Investors are starting to get a little flaky and aren’t closing after getting short sale approval as they feel prices will drop further,” stated an agent in Arizona.
“Investors interested in buy and hold have become more numerous in recent months,” according to an agent in Virginia.
Campbell’s HousingPulse Tracking Survey polls more than 3,000 real estate agents nationwide each month to provide up-to-date market data on home sales and mortg
By: Carrie Bay dsnews