In real estate news, you frequently see conflicting headlines based on different data, markets or points of view. I spotted one this week that has to do with an important detail in the housing recovery: owner occupants.
You see, during the housing frenzy years that led up to the recession, much of the speculative activity that was driving the bubble came from investors – both professional and hobbyists – who were in it for the buck. Remember the house flipping shows on cable networks?
Owner occupancies play an important role in the housing recovery as they signal stability in real demand versus investor-driven demand, which can be a lot more finicky.
The state of owner occupants right now is a little fuzzy. It's likely to be different depending on your market. And new versus existing homes may be telling different stories.
A story in Bloomberg Businessweek highlights a forecast from Metrostudy, a Houston-based real estate consulting firm, which expects double-digit increases in new home prices through the end of the year, driven by demand from owner occupants. Metrostudy analysts generally see more owner occupied life in new housing developments they track versus the tell-tale signs of investors – empty driveways, curtain-less windows, lack of toys in the yard.
Brad Hunter, chief economist of Metrostudy, told Businessweek:
"People are buying homes to live in them. That wasn't always the case at the height of the frenzy last decade, when speculators financed ultracheap mortgages and zero down payments bought newly built, unoccupied homes – and sometimes empty lots – to flip to the next buyer."
Of course, next year, he says, will be different.
Meanwhile, the market for existing homes still has a healthy share of investors. NAR reported last month that individual investors purchased 17% of homes in June, down from 18% in May and 19% in June 2012. This shows a little shrinkage, but not enough to think that this share of buyers is on a definitive downward spiral.
As unscientific as it may seem, the best way to gauge the state of owner occupancy in a neighborhood is to walk around and take note of whether there's life in the homes being bought or whether they seem to be tenant occupied or empty.
As the folks at Metrostudy point out, toys in the yard, a hose outside and curtains on the windows are good signs that families are around.
As we try to gauge the state of the housing market each week, owner occupancy is an important statistic to examine. If we start seeing a trend in new housing developments with a low percentage of owners living in them, that may signal a larger move toward speculative investing again.