As home prices continue to rise, one might wonder how long before they level off. In an interview with Rick Sharga, Executive Vice President of Auction.com, he predicted that rising home prices will begin to slowdown moving into 2014.
“I believe home price appreciation has been accelerated by the lack of available inventory and by investor activity. And I think prices rose more quickly than they would have because of investor activity.”
He added that rising interest rates seem to only be a deterrent for actual home buyers not investors, as most investors are liquid.
The deterrent for real estate investors is actually the competitive market. Prices are rising due to more investor activity, creating higher prices even in the shadow inventory. Many investors are holding back and waiting, while others are making plans to exit the market.
Another reason to consider as to why an investor might stop buying and/or begin selling, would be that they have already achieved the number acquisitions they had set out to buy.
Institutionalized investors are expected to significantly taper their activity mainly due to the nature of their acquisition model. The lower end of the market is rising which makes it difficult to justify the rate of return on a higher purchase price.
“As home prices go up, borrowers who were either in negative equity or a neutral position are suddenly finding themselves in the positive equity position and are able to put their houses on the market,” added Sharga.
He also said the in one year the supply and demand could be a whole different game as more inventory, existing and bank owned, becomes available.
Sharga’s final comment in the interview was that rising interest rates are a key factor to the protection of another bubble.
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