Are Investors Going to Leave this Market?

Are Investors Going to Leave this Market?

The April HomeDex Report showing March Real Estate transactions in North San Diego County was just released, courtesy of the North San Diego County Association of Realtors, this past week.   Here are just a few of the highlights:

 

1)       Detached homes in North County increased 11.11 percent in March to $525,000 compared to $472,500 in February.  The Year over Year median price in North San Diego County jumped 26.51 percent.

2)      The number of North San Diego County Single Family Detached listings (both active and contingent) declined 2.89 percent in March compared to February, and decreased 40.9 percent compared to March of last year.  This was the 19^th month of year over year declines in listings.

3)      The HomeDex affordability percentage for all homes in North San Diego County, attached and detached, decreased to 39 percent in March compared to 43 percent in February.

 

 

Our question is, “Are investors going to leave this market?”  One of the numerous factors that have contributed to the current market frenzy is that investors are coming in with tons of cash and buying up those properties that will give them an acceptable rate of return.  Investors are buying primarily in the lower price range but are also finding a few with acceptable returns at much higher price levels.  We would even go out on a limb and state that every listing that is less than $400,000.00 and is priced reasonable will receive multiple offers.  The multiple offer situation does create competition that garners a higher than normal price attainment, thus the prices continue to rise.

 

Now that the prices have reached the current level, the return on investment for Investors is no doubt waning.  We have investor clients who have already altered their way of approaching the market and we predict that this trend will continue.  Does it make sense that as the prices continue to rise, more and more investors will pull out of the competition?  If this happens, the rate of increase for the prices on homes will slow or even flatten.

 

This is an extremely interesting time for the Real Estate Market.  With what appears to be double digit price increases, there are more and more sellers bringing their homes to the market.  With extremely low finance rates, buyers are stepping up to take advantage of the long term benefit.  If more investors pull out and the rate of price increase slows, then the sellers who have been sitting on the side line will no doubt jump in.  And, the buyers who have lost out on multiple offers will have more homes from which to choose.  At this point we will have a healthy market.