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All-Cash Buyers Push Investment Home Prices Up 19.3 Percent

NationalMortgageProfessional.com
May 24, 2016
HomeUnion has released April 2016 data on investment homes and owner-occupied homes, finding that investment home prices are driving real estate values higher across the board

HomeUnion has released April 2016 data on investment homes and owner-occupied homes, finding that investment home prices are driving real estate values higher across the board–in both the owner-occupied and non-owner-occupied segments of the market. Median investment home prices, which include financed and non-financed properties, soared 12.5 percent to $203,000, while owner-occupied median home prices rose 5.3 percent to $251,900. The most dramatic increase was seen in the all-cash, non-owner-occupied segment of the housing market, where median prices jumped 19.3 percent to $181,000.

“Uneasiness in the equity markets helped support a surge in investment home prices last month,” said Steve Hovland, director of research for HomeUnion. “Year over year, prices for cash investment sales jumped more than 19 percent as portfolios were reallocated at investors hedged against stocks. Cap rates for all-cash sales last month reflected investors’ willingness to accept lower, but still significant yields.”

Here’s how the investment sector of the housing market compares to the owner-occupied sector:  

  Data Year-Over-Year
Total Median Sales Price $234,600 8.3%
Owner Occupied $251,900 5.3%
Investment Median Sales Price $203,000 12.5%
Investment Cap Rate 5.3% -70 basis points
Investment Cash Price $181,000 19.3%
Cash Cap Rate 6.1% -90 basis points
Investment Leveraged Price $233,200 4.3%
Leveraged Cap Rate 4.5% -40 basis points

Owner-occupied homes also recorded a substantial year-over-year gain in prices.

“Several economic factors combined to support price growth, including an uptick in wages, strong job growth in the first quarter and historically low interest rates. An unexpected spike in consumer sentiment and healthy auto sales provides further evidence that Americans feel confident enough to purchase homes,” said Hovland. “Looking ahead, May home sales are expected to remain healthy after strong language in the Fed minutes indicated an interest rate hike in June is firmly on the table. The potential for rising mortgage rates could compel some buyers to act sooner to secure mortgages prior to the June announcement.”

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