US Housing Market Figures

Looking at the S&P Case Shiller Home Price Index, we see an almost 25% increase since jan-2013. Can we assume the U.S housing market to be recovered and be a stable investment oppurtunity?

Housing Sales

The REAL Trends Housing Market Report for May 2014 shows that housing sales declined by 1.8 percent in comparison to the same month a year ago. However, this was a big improvement over the decline of 6.1 percent year over year in April 2014.

Even though home sales decreased on a year to year basis, the average price of homes sold continued to increase with 7.0 percent in May 2014 compared to May 2013.

 We appear to have reached a plateau that absent an increase in the market for jobs, income growth or looser underwriting standards, there are no evident drivers of a sustained recovery in housing unit sales. The recent increase in inventory will help, as will the recovery in the general economy. We also believe that given historical norms for home buying as a percent of households we are at or near the expected level of housing sales.

- Steve Murray, editor of the REAL Trends Housing Market Report.

All Cash Purchases and institutional investors

From data collected by RealTrac, and published in their 2014 Q1 report, we can see that that the share of all-cash sales reached a new high in the first quarter, even though the share of the institutional investors dropped to the lowest level since the first quarter of 2012.

In the first quarter of *year*, 42.7 percent of all U.S residential property sales were all cash-purchases; up to 37.8 percent in the last quarter of 2013 and up to 19.1 percent in the first quarter? of 2013, the highest level seen since measuring in 2011.

Despite this increase, the share of institutional investors decreased to the lowest level since the first quarter of 2012. In the first quarter of 2014, that accounts for 5.6 percent of all U.S residential sales, down to 7 percent in the first quarter of 2013.

Strict lending standards combined with low inventory continue to give the advantage to investors and other cash buyers in this housing market.”

- Daren Blomquist, vice president at RealtyTrac.

It is a sign of a strong market when institutional investors are pulling and the demand remains strong. These other cash buyers include individual investors, second home buyers and owner-occupant buyers. Despite the lower share of institutional investors, home prices continued to appreciate in most markets, albeit in many cases at a slower pace.

Undervalued

The quarterly report also showed that the average sales price of an all-cash purchase in the first quarter was $207,668. This is still 13 percent below $237,900, the average estimated full market value of the properties that were purchased. This shows that there is still is a good potential for this market.

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Gelein.huiskes

Gelein Huiskes

Gelein has been interested in the financial world and global economics since high school. For over 3 years he has been a member of a university investment team, of which one year he was the treasurer.

This article provides opinions and information, but does not contain recommendations or personal investment advice to any specific person for any particular purpose. Do your own research or obtain suitable personal advice. You are responsible for your own investment decisions.

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