A continuing slide in the volume of distressed properties seen in the housing market is helping to boost home prices in many parts of the country. Meanwhile, uncertainty about the impact of next month’s national elections appears to be causing some would-be homebuyers to delay taking any action until after November, according to the October HousingPulse survey of real estate agents.
The survey found that one major reason behind the rise in home prices is a fairly sharp drop in the share of distressed properties found in recent home sales.
The HousingPulse Distressed Property Index (DPI), which tracks the proportion of home purchase transactions involving distressed properties, fell to a record low of 38.6 percent in September based on a three-month moving average. This was the fifth month in a row that the DPI has fallen, and is now down more than 10 percentage points from the near-record-high 48.7 percent DPI level recorded in February of this year.
The precipitous drop in the share of distressed properties in the housing market is largely attributable to fewer foreclosed properties or real estate owned (REO) being put up for sale by banks. HousingPulse respondents reported in October that major banks appear to be keeping many REO properties off the market this year. But they also suggest banks may be looking to unload significant amounts of REO next year – a move that could put downward pressure on home prices.
In addition to the standard monthly questions about housing market conditions, HousingPulse respondents were asked in this month’s survey whether the upcoming national elections were having any impact on the housing market in their area. Interestingly, the results were mixed.
A number of agents reported that home sales had slowed in September and October as many homebuyers were taking a wait-and-see attitude about the elections. “We are seeing middle-to-high-income buyers pausing due to the upcoming elections. We hear it daily,” reported an agent in Georgia. “It [the election] is having a negative effect on home sales in our market. Everyone is waiting to see who gets elected in November,” added an agent in Pennsylvania.
But other agents reported the upcoming presidential election was actually spurring some home purchases by buyers concerned that mortgage interest rates would rise after November. “Many of my clients are worried about interest rates rising after the election and feel they may be artificially held down by the current administration,” noted an agent in Virginia. “I think now people are in a hurry before the election and not knowing what the future will hold after the elections,” added an agent in New York.