Good Home Prices Bring in Quality Property Into Market

With home prices recoding its first gain in nearly two years, sure signs of economy’s revival have emerged. These positive indicators are expected to lure more sellers to list their properties in the market.

According to the Redfin Real-Time Home Buyer Survey conducted recently, 32 percent of respondents said the present time was ripe to unload their homes; up two percent in a row. Also, more than half believe prices is set to increase in coming months.

"Low prices and low home-equity have resulted in a largely illiquid market for the past two years, and so -- no matter how low mortgage rates get -- sale volume will remain log-jammed until higher prices draw more move-up sellers into the market," said Redfin CEO Glenn Kelman in a statement.
Illiquid market is where security or other assets cannot easily be sold or exchanged for cash without a substantial loss in value. These illiquid assets include houses, cars, antiques and some types of debt instruments.

Meanwhile, the recent price rise has significantly reduced investor participation in the housing market. According to a study by Campbell Survey investor participation in the housing market fell to 21.9 percent in July, from 23.5 percent in June.

The survey quoted an agent in Massachusetts as saying that prices in the area are too high for investors. “Investors need a deal. There are not as many opportunities as there was this time last year. It seems all the rookie investors are buying now and paying too much,” the survey quoted another agent in Florida.

Also, low proportion of distressed properties is another reason for investors exiting the housing market. The proportion of distressed properties in the housing market fell to 42.2 percent in July, from 45.1 percent in June, the Housing Pulse Distressed Property Index showed.

A decline was also noted in the purchase of non-distressed properties.

In contrast, current homeowners showed strong interest in buying homes. They accounted for 43.5 percent of home purchases in July, up from 42 percent in June.

“Overall homebuyer demand and home price appreciation is being driven by historically low interest rates,” Thomas Popik, research director for Campbell Surveys, said in a statement. “But savvy investors are the canaries in the coal mine—they are warning that if rates rise, the high proportion of distressed properties could once again push home prices down.”