Investors with Cash Driving Up Home Prices
Updated: Thursday, 15 Mar 2012, 6:11 PM MST
PHOENIX - Home sales are up across the valley. But many families looking for affordable places to live are getting squeezed out as more and more investors move in.
Investors are taking advantage of foreclosed homes and short sales, paying cash. But regular buyers -- the ones who need a mortgage -- lose out. It’s happening all over the valley.
It’s bad news if you want to buy a home because it is very competitive. But good news for people who are stuck in underwater homes -- prices appear to rising fast.
We’ve all heard the saying cash is king, but in the valley's real estate market, that old saying is truer than ever.
“The real distinction is between who have got cash and people who need a loan. And the people who have got cash are in the driver's seat,” says Mike Orr, a professor at ASU’s W.P. Carey School of Business.
“We went straight through normal and back from a fear-dominated market to a greed-dominated market with nothing in between.”
Orr says 40 percent of home sales are cash deals today, compared to about 10 percent in normal times.
Investors typically pay in cash and realtors say buyers who need mortgages just can't compete.
“It really is frustrating, some people have put in 10 or 12 offers and been shut out.”
But the good news for homeowners out there? Prices appear to increasing quickly.
“Prices are currently going up at about 1 percent per week,” says Orr. “At first the price change was quite subtle and now it is quite significant and that just makes people anxious to get their house now because next month, it might be 5 percent more expensive.”
In the $250,000-and-under range, last year, there was a 130 day inventory of homes for sale. Today, the number of homes on the market will last only 27 days -- and every month that supply is shrinking.
“I don't know yet when it is going to reach an end because there is no obvious source of new supply right now.”
Orr says the number of foreclosures is going down and so is the number of people behind on their mortgages.