In many markets, an upswing in demand for housing is being caused by a large number of cash buyers, said UNC Charlotte finance professor Tony Plath.
“What you’ve got are private equity firms buying up thousands of houses,” he said. “The demand for housing has increased more than the demand for mortgages because speculative investors are holding properties for longer periods of time.”
That means large blocks of real estate are being bought, though people aren’t immediately moving into the homes.
“They’re speculating they can flip them in five years and get a reasonable rate of return, and maybe capture a capital gain,” Plath said. “We’ve never seen 20 percent of the (home buying) market coming from cash buyers, like now.”
It’s a trend being seen heavily in Charlotte, Raleigh, Atlanta and similar cities with job growth and a lot of young people who have moved to the area and previously been renting, Plath said. He suspects it’s also occurring in Gaston County to a lesser degree.
The current 4.5 percent rate on a 30-year, fixed home loan isn’t as good as the rate a year ago, Plath said.
“But historically, it’s still a pretty good deal, and it’s likely to be 5.5 or 6.5 percent next year,” he said. “What buyers are doing is jumping back into the market now so they can still capture a relatively attractive rate before it rises even more.”
‘Before it’s gone’
Realtor Teresa MacFarlane on Tuesday showed a home to a young woman who may represent an increasing demographic.
“She’s in an apartment but wants to own a home,” said MacFarlane, president of the Gaston Association of Realtors. “It hasn’t been a priority for her lately, but now mortgage rates are going up and inventory is shrinking.”
MacFarlane is among those who say they are hearing and seeing firsthand signs of a sharp uptick in home buying. And a Fannie Mae forecast issued last week projected that even higher interest rates won’t stem the tide, as easier loan terms and more jobs are likely to heighten demand for new mortgages from now through December.
“We’re definitely having a much better year overall I think, from what I’m hearing from my Realtor families,” said MacFarlane. “What I’m suggesting to homebuyers myself right now is that if you even wait 24 hours (to buy), it could be gone.”
The National Association of Realtors said purchases of previously owned houses advanced 6.5 percent to a 5.39 million annual rate in July. That was the fastest pace since November 2009.
Qualification standards for mortgages were much too loose during the end of the housing boom. But they veered to the other extreme post-2009, becoming extremely stringent, analysts say.
Those standards have begun to loosen again, however, as more confidence returns among lenders.
MacFarlane said she’s seeing more buyers and sellers engaged.
“And that makes my heart happy because it means we’ve got the right people playing the game to help the economy,” she said. “The indicator I’m seeing is things are still very much improving.”
You can reach Michael Barrett at 704-869-1826 or twitter.com/GazetteMike.