Wealthy Investors Take the Lead in Housing Market Recovery

 Posted on December 00, 0000 in Naperville Real Estate Attorney

Sales of investment and vacation homes surged last year, the latest evidence that investors and higher-income households are taking advantage of low home prices to scoop up bargains.

In its annual survey of investment- and vacation-home sales, the National Association of Realtors found that the number of homes purchased by investors rose 65% during 2011 to 1.2 million, accounting for 27% of all home sales. In 2010, investment properties accounted for 17% of all sales.

The number of homes purchased as second or vacation homes jumped 7% last year to 502,000—accounting for 11% of all transactions, up from 10% of all sales in 2010.

While the majority of homes sold last year went to traditional buyers who plan to use the home as a primary residence, their presence in the market declined to 61% from 73% in 2010.

During the housing boom, speculators were blamed for helping to inflate the bubble by snapping up homes, especially new homes, and then quickly reselling them as prices rose higher. That led to overbuilding. Some economists now believe that investors are helping to stabilize the market by buying up excess inventory.

While their activities could help to stabilize prices, they also are creating problems for some buyers. Real-estate agents say investors, and to a smaller extent vacation-home buyers, are outmaneuvering traditional buyers, who are less likely to have the financial means to pay cash for a home and may not devote as much time to searching for properties. The NAR survey found that nearly half of all investors and 42% of vacation-home buyers purchased their homes using cash. Traditional buyers, meanwhile, are seeing deals derailed because they can’t qualify for a mortgage or because appraisals for the homes they are trying to buy or sell come in too low.

The last two to three years has been a battle between the first-time home buyer and the investor, and the investors have won.

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