Many cities are reporting that Depressed Properties are becoming as high as 49% of the transactions. While that is not really hard to understand, as many homeowners who can wait out the market are doing so, it does represent a significant change from the past. Couple that with the fact that slowly rising interest rates are cooling off the number of first time home buyers in favor of investors.
Remember, investors are the ones who seek to profit by purchasing property below the market value, whether the property is move in ready or not, and reselling it for a profit. Nationally, in the past 12 months, the average price for damaged bank owned properties has declined by 16%, while move in ready bank owned properties have declined 20%. In comparison, non financially distressed property has only declined 4%.
Lenders are also becoming more choosy when lending on properties. Underwriters are making more demands, and time to closing is approaching 60 days. While we have not had that severe of a reaction here in Charlotte, we have noticed it.
As an offshoot of this, the number of investors willing to pay cash for a purchase has significantly increased. There are two primary reasons they are doing this; first, to encourage the seller / bank to give further concessions as fewer things go wrong with cash, and second, time to closing is shorter.
All in all, many are predicting an 8% - 10% increase in existing home sales this year.