The housing market in America is presently going through major ownership changes. Overall residential property ownership has hit a low in the 50 year period. This has happened despite the institutional investors scaling back their investment in real estate. Even in such an environment, housing prices continued to grow higher. During 2016’s third quarter, the average price of a condo or any single family home reached about $223,500. This is just 1.5 percent below the pre-recession levels. Markets also witnessed a steep rise in “landlord” buyers. These buyers-comprising about 37 percent of total purchasers- are those who do not stay in their homes. Such a phenomena is now peaking at 21 year highs. According to Alex Villacorta of Clear Capital Analytics, although the prices in a number of markets are near their pre-bust levels, both real estate supply and demand is quite different from the turbulent days of 2006 and 2007. It is vital that all market participants must understand the character of the real estate market at the present time.
Falling home ownership
US home ownership fell much below 63 percent in 2016, the lowest from 1965. The theories concerning this trend vary from tepid growth in wages to high housing prices. Costly student loan debt may also be a factor.
Rise of the landlord buyers
Many are concerned about the ascent of landlord buyers. More problematic is that it happens at a time when prices of real estate are near their record highs. It is well known that after the financial market crash, only the smart institutional investors entered the weak housing market. The rise in the housing prices meant that the sector began to price out of the property investment secne and landlord buyers came into the picture. This can be easily explained by the numbers. In 2012, institutional investors comprised 7.8 percent of real estate market. In 2017, that number is depressed to a meager 2.9 percent.
The phenomena of landlord buying may not be necessarily bad. The housing market can actually go for a sustained and longer term growth as landlord buyers are made of individuals who have paid off their once home mortgages and are now eying a second home as an excellent investment. The home equity could help to sustain an uncertainty period in the housing market. This would be quite possible with a large number of renters available to fill the investment properties.