Limited Financing Constrains Housing Market in May, Survey Finds
WASHINGTON, D.C. (June 20 –
traffic, a major indication of future home sales, tumbled in May,
according to the latest
Campbell/Inside Mortgage Finance HousingPulse Tracking Survey..
The closely-watched survey's traffic index for first-time homebuyers
fell from 51.7 in April to 45.3 in May, while the traffic index for
current homeowners fell from 51.6 to 44.8. Meanwhile, the traffic index
for investors fell from 55.3 to 54.6. Any index value less than 50
indicates a decrease in traffic from the previous month. For the
previous three months, the first-time homebuyer and current homeowner
indexes had been well above 50. Because traffic typically leads to
closed transactions, these significant declines could indicate a
downward shift in the housing market in the coming months.
The HousingPulse Survey’s Distressed Property Index, a key
measure of the health of the U.S. housing market, fell slightly to 46.7%
in April, although sales of distressed properties continued to account
for nearly half of the market.
The monthly HousingPulse Survey also showed the proportion of
first-time homebuyers in the housing market rose to 37.3% in May, from
35.7% in April. The gap between first-time homebuyers and distressed
property supply closed to 9.4 percentage points in May, down from 12.0
percentage points in April. Back in May 2010, the gap between first-time
homebuyers and distressed property supply was just 5.0%.
First-time homebuyers absorb housing supply, while move-up and move-down
buyers produce no net take-up in inventory. When the supply of
distressed properties exceeds the demand from first-time homebuyers,
investors must step into the market to buy these properties, often at
fall in homebuyer traffic indexes and other data show that this
spring-summer home-buying season will be significantly below last
year’s,” said Thomas Popik, research director for Campbell Surveys.
“First-time homebuyers have difficulty getting mortgage financing and
current homeowners are often locked into properties with negative home
equity. That leaves investors to take up the slack.”
Investors accounted for
21.6% of the housing market in the month of May, down from 23.0% in
April. Survey respondents indicated that most investors buying through
real estate agents are using personal funds. Hedge funds and other large
distressed property investors are rarer, except in coastal regions of
the United States such as California. Use of retirement funds, home
equity lines of credit, and bank savings accounts is common for
individual investors and small groups.
results show that investors lack access to bank financing. Seventy-four
percent of investors bought properties using cash during the month of
May, while only 11% of first-time homebuyers bought using cash. As more
investors move from flipping properties to a hold-and-rent strategy,
their limited sources of personal funding are tied up.
Campbell/Inside Mortgage Finance HousingPulse Tracking Survey
queries 3,000 real estate agents nationwide each month and provides
up-to-date intelligence on home sales and mortgage usage patterns.
more information on the survey, contact John Campbell at Campbell
Surveys at (202) 363-2069 or