Who’s Buying Up What Little Housing Inventory We Have?

We’ve seen the main causes of the inventory shortage we are currently experiencing, but now the question is: who is doing all the buying? It is certainly not the same mix of people who were buying over the past five years! First-time home buyers usually cannot make so many all-cash offers. Borrowers using FHA-guaranteed loans cannot compete.In reviewing the latest article from DQ News, “Southland Home Sale Report” for April, 2013, the picture becomes clearer. “Southland” in this article refers to the California counties of Venture, Los Angeles, San Bernardino, Riverside and San Diego. Cash buyers made up 33.5% of all buyers in April (vs. 16.0% average), more than double their average number. Absentee buyers, mostly investors, accounted for 30.2%, nearly double their average. These two categories alone, double their  average size as a percent of market activity, have the effect of knocking out an equal percentage of your conventional home buyers. A typical buyer, who is depending on a loan, cannot compete with an all-cash offer.

Truth is, the market is continuing to adjust, and has certainly not settled back into anything we know as “normal.” Not yet. But here are many signs of a brighter future ahead. Short sales are down to 17.7% from their high of 24%, and foreclosed sales (REOs) are way down to 12.4% from a high of 56% Combined our distressed inventory (Short Sales & REOs) took up 80% of the market just a few years ago! Now it’s down to 28.1%. Lastly, the percentage of homes flipped is down to 6.0%, however, this is probably  not due to a decrease in interest on the part of these types of investors, but that they are having to compete so much more with everyone else. Before, they could buy up all the bank-owned properties they could afford. Now it appears that everyone on the market wants whatever they can get.

Meanwhile, the lending market has changed. Where are people getting their home loans now? Wells Fargo leads the list with the highest number of loans generated in April at 7.9%, followed by JP Morgan Chase at 2.7% and Prospect Mortgage at 2.5% Notice the absence of some big names? That is no accident. Consumers fed up with the run-around they perceived, backed by a large number of realtors losing deals, due to lack of responsiveness from some bank, lead to both sides all but stopping doing business with those banks that would not or could not work with them. You can do a Google search for borrower frustration and insert the name of any missing big bank. The “Move Your Money Project” (dot org) also had a huge influence in directing borrowers to local credit unions and community banks, both categories taking up a lot of the missing slack. But by the percentages we can easily surmise that they are all participating in a much smaller percentage of the  market than the previous big guys. But then none of the new ones will be “too big to fail.”

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