Home prices are rising at levels not seen since the real estate boom, but American homeownership remains on the decline.
The two trends underscore the nature of the housing rebound: Gains in pricing have been driven significantly by investors, leaving many would-be buyers behind.
Prices are rising because of strong demand, a lack of supply and a sharp recovery in the hardest-hit markets. The number of foreclosed homes coming to market has also dropped dramatically. But because lending standards remain tight, the everyday home shopper is often losing out to investors able to pay cash.
“What we are seeing right now is definitely not normal,” said Jed Kolko, chief economist for real estate website Trulia.com.
The number of homes for sale has not only been constrained by the drop in foreclosed properties. The low level of building over the last several years also has diminished supply, as has the fact that many borrowers remain stuck underwater — owing more on their homes than the market value — and are unable to get the prices they need to sell their homes.
The Standard & Poor’s/Case-Shiller home price index of 20 American cities rose 0.3 percent in February over the previous month and was up 9.3 percent over February 2012. It was the ninth consecutive annual increase in the closely watched index and the best annual improvement since May 2006.
A separate report by the Census Bureau showed the nation’s homeownership rate hit 65 percent in the first quarter, a decline of 0.4 percentage point from the prior quarter and the same quarter last year. An increase in the number of rental properties, tight mortgage-lending standards and stiff competition among investors have made it tough for average buyers, analysts said.
“Although there are some signs that conventional, mortgage-dependent buyers are playing more of a role in the housing recovery,” wrote Paul Diggle, property economist for Capital Economics, “investors remain the dominant force behind the house price bounce-back.”
Investors, both large and small, have swarmed once beaten-down housing markets over the last year. Many have sought to buy homes on the cheap, fix them up and rent them out with an eye toward long-term appreciation. But prices have risen so quickly that this strategy has become increasingly..
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