Home sales are beginning to rise following one of the worst years the real estate market has seen in a long time. However, the rise in sales cannot be attributed to new or first-time homebuyers; instead, investors are responsible for the increase.
According to Northwest Florida Daily News, the number of new buyers has decreased in the past month to the lowest it has been in the past two years. Investors, armed with cash, are the ones who are purchasing foreclosed properties for very low prices.
“The cash-rich investors can come in and get foreclosed properties at incredibly favorable prices,” said Paul Dales, senior U.S. economist for Capital Economics, to Northwest Florida Daily News. “The average Joe can’t take advantage because they simply cannot get the credit to buy.
Thirty-seven percent of sales in the beginning of the year can be attributed to foreclosures and 32 percent of sales were all-cash buyers. Florida is one of the states that has been hit the hardest and in the beginning of the year 63 percent of sales were properties in danger of foreclosure.
Even though the prices for homes today has dropped dramatically due to the amount of homes in foreclosure, new-buyers are now facing a different problem–more strict lending standards.
Banks and mortgage lenders are requiring much more from homebuyers since the foreclosure crisis hit a few years ago. Lenders are now requiring a greater down payment and this is what makes it hard for first-time homebuyers to purchase at this time.
The paper also wrote, “If you can get the financing, it’s a great time to buy a home with prices this low,” said Patrick Newport, U.S. economist with HIS Global Insight.
There are other possible reasons that could be affecting the low turnout of new-buyers in the housing market and those can be the rising unemployment rates or simply that buyers are concerned the prices will plummet even farther.
Without an all-cash offer or a large savings account it is hard for first-time homebuyers to assist in the rise of home sales and therefore investors are the ones to thank.