NAR Chief Economist Lawrence Yun said investors with cash took advantage of market conditions in 2011.
“During the past year investors have been swooping into the market to take advantage of bargain home prices,” he said. “Rising rental income easily beat cash sitting in banks as an added inducement. In addition, 41 percent of investment buyers purchased more than one property.”
Yun said the shift in investment buyer patterns in 2011 shows the market, for the large part, is able to absorb foreclosures hitting the market. Increased investor purchases are partly responsible for the large percentage of all-cash purchases seen in the last year. They make up around one-third of all purchases. Forty-nine percent of investors paid cash in 2011.
“Clearly we’re looking at investors with financial resources who see real estate as a good investment and who aren’t hesitant to use cash,” Yun said. Of the buyers who didn’t use all cash they paid a hefty average 27 percent down payment.
As opposed to investment purchases, which were made out of the desire for rental income, vacation homes were driven by lifestyle factors and were purchased by households making an average of $88,000 a year.
What portion of the market are these vacation sales? They accounted for 11 percent of all sales in the market. Overall mortgage applications increased 4.8 percent from last week, according to the Mortgage Bankers Association (MBA). The refinance share of the market decreased again to 71.2 percent. Just a few months back it was over 80 percent.
“Applications to buy a home picked up last week, and are running more than two percent above the level reported at this time last year. Home purchase applications for conventional loans are now about 10 percent above last year's level,” said Michael Fratantoni, MBA's Vice President of Research and Economics. “Applications for government loans increased by more than 10 percent over the week, for both purchase and refinance, likely spurred by borrowers seeking to apply before scheduled increases in FHA mortgage insurance premiums at the beginning of April.”
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