First Time Home Buyers and Investors Sales Decline – But Why?

How is it that the depreciation of home values over the past few years has made housing more undervalued relative to incomes than ever before, yet home sales have continued to decline?

Firstly, the soft economy (high employment) combined with the difficulty of obtaining a loan continues to prevent first time and repeat homebuyers from taking advantage of the sinking prices and low interest rates.

Even more alarming fact can be seen on the investor front. The housing demand from investors and cash buyers continues to soften which means that they feel some uncertainty about the economic climate.

According to researchers at Capital Economics, since January, the number of homes purchased by cash buyers and investors has fallen by 26 percent. Over the same period, purchases by first-time and repeat buyers have risen by just 2 percent.

Based on the Case-Shiller house price index and compared to the 1975-2010 average, the research firm says housing rests around 23 percent undervalued against disposable income per employee and disposable income per capita. These are both record lows.

Again where are the buyers?

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