Affordable Prices Draw Investors to Real Estate
November 11 2009 - 1:00AM
PR Newswire (US)
Nearly Half of Foreclosure Buyers Seek Investment Property LOS
ANGELES, Nov. 11 /PRNewswire/ -- Affordable prices and foreclosures
are attracting investors to the housing markets today, and the
number of consumers interested in investing in real estate has
doubled since March 2009, according to the new Move.com
Homeownership Survey released today. Low prices and foreclosure
bargains have also become the most important reasons motivating
buyers today to purchase a home. According to the Move.com survey,
one out of eight (12.1%) homebuyers today plan to purchase a home
as an investment property, compared to 5.6 percent seven months
ago(1). Of those interested in buying a home for investment, 15.8
percent were men and 8.1 percent were women. Foreclosure buyers,
accounting for 25.3 percent of consumers interested in purchasing a
home, are a major source of potential investment activity for
today's housing market. Forty-two percent (42%) of potential
foreclosure buyers regard their purchases as investments, while
57.6 percent plan to live in the foreclosed home themselves.
Foreclosure investors, according to the Move.com survey, intend to
convert their foreclosures into rentals (13.2%), fix them up for
re-sale (11.3%), or house a family member until the home can be
sold at a profit (17.4%). Of the forty-two percent interested in
purchasing a foreclosure as an investment, survey respondents ages
35 to 49 (52.6%) were by far the largest demographic. Expected
Profits Gained From Purchase Discounts and Appreciation The
Move.com survey found foreclosure buyers expect to profit from both
deeply discounted purchase prices, as well as healthy appreciation
rates over five years. Most foreclosure buyers (58.2%) expect to
pay 20 percent or less than market price for a foreclosure, while
38.5 percent expect a 25 percent or greater discount. While, 73
percent expect their properties to appreciate ten percent or more
in five years, 28 percent expect their purchases to appreciate 20
percent or more during that same investment horizon. According to
the Federal Housing Finance Administration's Purchase Index, homes
have appreciated an average of 15 percent nationally since 2004(2).
According to the Move.com survey, the most important reasons
motivating prospective home buyers and investors to purchase a
house include concerns that prices are as low as they will go
(23.6%) and desire to take advantage of foreclosure bargains
(18.7%). The second most important reasons motivating property
purchases include taking advantage of the great selection of homes
for sale in their community (21.2%) and concern interest rates will
rise (14.2%). "This latest Homeownership Survey validates what many
had hoped to see in the housing markets -- affordable prices and
ample inventories are restoring the appeal of real estate to
investors while providing opportunities for first time home buyers
to enter the market," said Move, Inc., Chief Revenue Officer, Errol
Samuelson. "In today's environment, regardless of whether you're an
investor or interested in purchasing a home to live in yourself,
residential real estate is a more attractive investment today for
many than it has been in recent years." First Time HomeBuyers,
Shifts in Motivation, and Affordability Despite today's challenging
economy, demand for home ownership remains strong and first time
buyers make up a significant segment of all potential buyers.
Nearly ten percent (9.8%) of consumers say they plan to buy a home
in the next two years, with 5.4 percent planning to purchase in the
next 12 months. Of those planning to purchase a home in the near
future, nearly half (48.3%) are first time buyers, with women
(52.8%) slightly more interested in entering the housing market
than men (44.1%). While affordability and foreclosure bargains have
consistently been the primary reasons motivating homebuyers in the
past four months, secondary reasons have changed. In June 2009,
interest in taking advantage of low interest rates (21.1%) was
cited as the second most important reason to buy. Today, buyers are
motivated more by the great selection of homes for sale in their
community (21.2%) as the leading secondary reason to purchase a
home. The Move.com survey also found that while perceptions related
to affordability have improved in four months, most Americans are
still unaware of how affordable homes are today. In June 2009, more
than three-quarters (76.4%) of Americans said they thought a family
earning the national median income of $52,029(3) could afford 50
percent or fewer of the homes for sale in their area. Today only
half (50.4%) of all Americans say a median income family can afford
50 percent or fewer of the homes for sale in their neighborhood, a
26 percentage point improvement in just three months. In fact, a
median income family today can afford approximately 70 percent of
the homes listed for sale on the Move Network of real estate Web
sites.(4) "In the past year, affordability has improved
significantly, especially for first time home buyers, and is higher
now than at any time the past two decades(5)," said Samuelson.
"Even more encouraging is that 34.1% of survey respondents said
they expect median income families will be able to afford more than
50 percent of the homes in their neighborhood a year from now. This
sentiment is especially true with people ages 18 to 34, the
nation's next group of first time homebuyers." Message to
Washington The October 2009 survey also found that the Federal
government's approval rating by consumers on housing issues has
slipped slightly since March 2009. By a six-percent margin,
Americans said they don't think the government is doing enough to
stabilize the housing market (48.2% compared to 42.2%), despite
efforts to prevent foreclosures and keep interest rates low.
However, while 48.2% of respondents were negative about the
government's job to stabilize the housing market, the priorities
consumers have for the government related to housing haven't
changed in the past year. According to the survey, consumers still
want low interest rates (31.4%) and action by the government to
help homeowners prevent foreclosures (28.5%), the same two top
priorities expressed by survey respondents in March 2009. The
survey found that public participation in the Making Home
Affordable programs to prevent foreclosures proved to be much lower
than anticipated. In March 2009, several days after the details of
the programs were announced, Move's Homeownership Survey found that
17.6 percent said they intended to participate in the
Administration's program. Seven months later, only 8.8 percent said
they actually did participate. Fear of Foreclosure Fades While
foreclosure filings reached record levels in the third quarter in
2009, with one in every 136 American homes receiving a foreclosure
filing(6), homeowners today are actually less concerned that they
or someone they know may be facing foreclosure as compared to seven
months ago. In March 2009, 52.5 percent of all survey respondents
said they were concerned that they or someone they know may face
foreclosure in the next 6 to 12 months. That number dipped slightly
to 45.1 percent in October 2009. According to the survey, fear of
foreclosure today is greater among women (49.3%), with people
earning $50,000 or more annually (43.9%), and with people living in
the South (42.6%) and West (55%). The six states today with the
highest rate of foreclosures are California, Florida, Arizona,
Nevada, Illinois, and Michigan. These six states accounted for 62
percent of the nation's total foreclosure activity in the third
quarter of this year.(7) The Economy, Refinancing and Shifts in
Consumer Spending The company's October 2009, Homeownership Survey
found today's economy may be impacting how homeowners that
successfully refinanced their mortgage in 2009 (27.6%) are spending
their refinancing gains. In June 2009, homeowners that refinanced
their mortgages said they used the monthly savings almost equally
to fund home remodeling or repairs (12.3%) and to pay living
expenses (12.2%). In addition, June 2009 survey respondents said
they used 10.7 percent of the monthly savings to fund retirement,
5.5 percent to fund tuition, and 5.3 percent to fund investments.
However, in October 2009 homeowners that successfully refinanced
their homes said they used the savings to pay down consumer debt
(11.8%), to fund living expenses (11.9%), and to pay home
remodeling or repairs (9.6%). Use of the remaining monthly savings
in October 2009 to fund tuition (3.7%), investments (3.6%) and
retirement savings (5.1%) was reduced by almost half as compared to
allocations for these same categories in June 2009. This survey,
the fifth in a series of quarterly Homeownership Surveys
commissioned by Move, Inc., is based on interviews conducted from
October 16 - 18, 2009. A total of approximately 1,004 interviews
were completed, with 526 female adults and 476 male adults. The
margin of error on weighted data is +/- 3. The survey was conducted
by OmniTel, a weekly national telephone omnibus service of GfK
Custom Research North America. The raw data are weighted by a
custom designed computer program, which automatically develops a
weighting factor for each respondent. This procedure employs five
variables: age, sex, education, race and geographic region. Each
interview is assigned a single weight derived from the relationship
between the actual proportion of the population with its specific
combination of age, sex, education, race and geographic
characteristics and the proportion in our sample that week. Tabular
results show both weighted and unweighted bases for these
demographic variables. ABOUT MOVE, INC. Move, Inc. (NASDAQ:MOVE) is
the leader in online real estate with 9.3 million(8) monthly
visitors to its online network of websites. Move, Inc. operates:
Move.com®, a leading destination for information on new homes and
rental listings, moving, home and garden and home finance;
REALTOR.com®, the official Web site of the National Association of
REALTORS®; Welcome Wagon®; Moving.com; SeniorHousingNet(TM); and
Top Producer® Systems. Move, Inc. is based in Campbell, California.
This press release may contain forward-looking statements,
including information about management's view of Move's future
expectations, plans and prospects, within the safe harbor
provisions under The Private Securities Litigation Reform Act of
1995. These statements involve known and unknown risks,
uncertainties and other factors which may cause the results of
Move, its subsidiaries, divisions and concepts to be materially
different than those expressed or implied in such statements. These
risk factors and others are included from time to time in documents
Move files with the Securities and Exchange Commission, including
but not limited to, its Form 10-Ks, Form 10-Qs and Form 8-Ks. Other
unknown or unpredictable factors also could have material adverse
effects on Move's future results. The forward-looking statements
included in this press release are made only as of the date hereof.
Move cannot guarantee future results, levels of activity,
performance or achievements. Accordingly, you should not place
undue reliance on these forward-looking statements. Finally, Move
expressly disclaims any intent or obligation to update any
forward-looking statements to reflect subsequent events or
circumstances. (1) March 2009 Move, Inc., Homeownership Survey (2)
FHFA Purchase Index June 2004 to June 2009. (3) U.S.Census Bureau
2008 (4) Calculation assumes national median income per month, 20
percent down, 30-year fixed mortgage and 25 percent of gross income
allocated to mortgage. (5) National Association of REALTORS®
Affordability Index (6) October 2009, RealtyTrac Report (7)
RealtyTrac news release, U.S. FORECLOSURE ACTIVITY INCREASES 5
PERCENT IN Q3, October 15, 2009. (8) comScore Media Metrics,
September 2009 DATASOURCE: Move.com CONTACT: Julie Reynolds,
+1-818-264-5594, , or Pierre Kacsinta, +1-805-557-3128, , both of
Move.com; or Victor White, +1-415-904-7070, , for Move.com Web
Site: http://www.move.com/
Copyright