The housing market sent mixed signals in February as the percentage of distressed properties in home purchase transactions dipped while investors stepped up their home buying. These are two major findings of the latest Campbell/Inside Mortgage Finance HousingPulse Tracking Survey conducted in early March.In what could normally be viewed as a positive development, the HousingPulse Distressed Property Index or DPI, a key indicator of the health of the housing market, fell from 49.6% in January to 47.3% in February. This marked the first decline in the DPI seen since last fall.
But the drop in distressed property transactions was not likely the result of a healing housing market. Rather, it appeared linked to a nationwide delay in the listing and sale of distressed properties as mortgage servicers continued to deal with legal and regulatory fallout surrounding title and paperwork issues.
The proportion of move-in ready foreclosed properties or real estate owned, one category of distressed property, took a tumble in February, going from 17.5% in January to 15.4% in February. Some move-in ready REO may have been converted into damaged REO during extended vacancies caused by mortgage servicer processing delaysFor many homebuyers, mortgage financing is becoming an increasing obstacle. This was highlighted in the latest HousingPulse tracking survey as cash transactions set a new record, accounting for a huge 33.7% of purchases in February. The increase in cash purchases paralleled a rise in investor activity. Investors accounted for 23.5% of home purchases in February, up from 19.9% percent in only two months.
Real estate agents who participated in the survey of February transactions confirmed the surge in investors. “We are seeing investors come back into the market. One investor told me that one house he wanted came on Wednesday PM and had 9 offers by Thursday AM, ” stated an agent in New Jersey. “There are a number of investors and businesses buying up the short sale and REO properties and renovating them and then selling them as traditional sales, ” reported an agent from Arizona.
In a sign that housing sales are slipping at a time of the year when they should be increasing, average transactions per real estate agent in the survey fell from 2.1 in January to 1.7 in February. In most years transactions rise from January to February and the lack of an expected increase may indicate that the spring buying season will start with a deficit. Weather may have been a contributing factor to the low transactions in February.
“January was seasonably slow which affects closed sales for February. We have experienced an unusual amount of snow and unseasonably cold weather, which has an impact on the market. February pending home sales are up from January that will be reflected in March and April closed sales, ” predicted an agent in Massachusetts.
The Campbell/Inside Mortgage Finance HousingPulse Tracking Survey involves more than 3,000 real estate agents nationwide each month and provides up-to-date intelligence on home sales and mortgage usage patterns.