America / Economy

Fear of Buying Homes Becomes Fear of Missing Out

The unstable housing market caused investors to become apprehensive about investing in homes, but the low home prices simultaneously caused investors to worry about missing out on a good investment.  These big time – Wall Street – investors, called cash buyers, do not use 15-to-30 year mortgages; if they want a home they have the cash, and their plan is rent-to-profit.

These investors have been sweeping into the market and buying single-family homes, homes traditionally bought by prospective homeowners. Over the past five years Wall Street analysts’ estimate that between $7 billion and $9 billion worth of single-family homes have been purchased and converted into rentals by investors. [1]

The Census Bureau reports that home prices are increasing, and their homeownership statistics show that the rising prices are not coming from home owner purchaser’s demand.

Home Prices

Ownership

The low prices of homes mixed with the potentially high demand for rentals makes this investment strategy look smart. Demand for rental homes comes from displaced families, immigrants, other future first-time homebuyers and the older generations. All of these demographics will potentially increase, with immigrants and the older generation leading the pack.

In addition, investors have focused on geographic areas that saw plummeting home prices as a result of the recession, but have remained desirable living places, like Phoenix and California. As a result, potential home buyers in these areas have had difficulty buying homes because prices are higher due to competition and they rely on mortgages rather than paying cash up front.

Some worry that these bidding wars between home buyers and investors can cause inflated prices or a housing bubble. Mortgage providers and realtors also struggle to compete with investors.

In defense of the investors, their purchases have helped to improve the housing market. And they are only looking to make money, so if selling homes becomes more advantageous they would sell.

In addition, most single-home renters have higher incomes, more children, and care more about community issues according to the pollster ORC’s new study.

However, as the market improves and the demand for home-ownership increases, investor will likely step out of the home rental market and home-ownership will increase.

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