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Investor activity dominated a sluggish distress sale market in February as homebuyers are increasingly frustrated by difficulties getting financing, according to the latest Campbell/Inside Mortgage Finance HousingPulse Tracking Survey.
For 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 percent 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 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 percent in January to 47.3 percent 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 percent in January to 15.4 percent in February. Some move-in ready REO may have been converted into damaged REO during extended vacancies caused by mortgage servicer processing delays.
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