Though he doesn’t directly say so, King Solomon’s words on money management and prosperity contain a heavy dose of “look before you leap.” The prudent, the discerning, ad the cautious will reap rewards. Today, that kind of prudence may be driving big changes in the housing market, as more and more would be buyers are looking at homes – but not leaping to buy.
After a promising year in 2013 that spurred more optimism about the housing recovery, mortgage applications and purchases are down. Now, a new report from Business Insider suggests that many potential homebuyers are only testing the waters – and that could be good news for investors in income property
Many reasons have been floated for the stalling of the housing recovery, which looked to be progressing nicely with higher home prices and increased demand for existing homes. But, as we’ve noted before in this space, new mortgage rules and a struggling job market cast a long shadow over the housing market as a whole.
While those new lending rules are shutting out more marginal buyers, it seems that other would-be purchasers of residential properties are doing more browsing than buying. According to Business Insider, data on general housing trends gathered by Merrill Lynch reveal that while 2014 has seen a rise in the number of houses available, there hasn’t been a corresponding surge in mortgage applications.
What’s behind the discrepancy? Housing market watchers suggest that potential buyers – those who could qualify for a mortgage but aren’t taking that step – are investigating possible home purchases, but only as a matter of curiosity rather than out of a real intent to buy. That could be because a softer than expected job market makes these individuals skittish about taking on the obligations of a mortgage. Or that the prices of available houses are just too high.
The result? A slowdown in the recovery that may have a ripple effect on other areas of the economy as well – and one that could cause the Federal Reserve to rethink its commitment to tapering down its stimulus program to boost housing and the economy.
But this kind of “window shopping” in the housing market has a silver lining for investors who want to build wealth in income property the way Jason Hartman recommends. Creative, committed investors able to qualify for mortgages under the new rules may have more options than they think – and more houses to choose from in any given market.
Plus, a downturn in residential homebuying, whatever the reason, continues to mean an upturn in the rental market, which is rapidly growing nationwide across the demographic spectrum. And that means higher rents and more desirable tenants to help keep an investor’s income flowing. (Top image:Flickr/byrdiegyrrl)
Ro, Sam. “Americans are Interested, But Not Serious About Buying a Home.” Business Insider Finance. BusinessInsider.com. 9 May 2014
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