The housing market has been crippled by low levels of inventory in the years the following the recession. After the industry collapsed in 2008, many homeowners were with left with underwater mortgages.
However, in recent years the market has been on a path toward recovery. Mortgage rates have been affordable and home prices have risen. Investors were buying up property - especially in 2013 - and are soon looking to sell off this inventory. And the buyers, many of whom have been forced to put off a home purchase in the past several years, are anxiously awaiting for the homes to hit the market.
Zillow, a real estate marketplace, recently surveyed 110 economists on their thoughts about investor activity. The average price appreciation from those surveyed was 4.5 percent in 2014, with positive growth expected through 2018. This will be a guiding compass for investors looking to capitalize on their portfolio of homes. Where 2013 saw significant home prices increase - often at unsustainable levels - payouts for investments in real estate have likely been high. But with this price appreciation expected to ease in the coming years, investors will likely sell.
Of those surveyed, the largest amount said that investors would likely have sold the majority of their properties in the three to five years. And experts note that buyers are standing to gain from this as the market seeks a healthier balance.
"Real estate investors, both large and small, played a crucial role in helping to stabilize markets during the darkest days of the housing recession, but a decline in investor activity now isn't necessarily a bad thing, and could have real benefits for buyers," said Zillow Chief Economist Stan Humphries. "Buyers entering the market in the next few months will not be competing with cash-rich investors like they were last year which should be some small solace given the higher prices and mortgage rates that they will encounter. The gradual decline of investor activity should be viewed as another sign of the market slowly returning to normal, and I agree with the panel's expectations that there will not be a rush for the exit by institutional investors."
Another concern Zillow posed to its panel of economist was the Federal Reserve's quantitative easing program, which has been in place since September 2012. The Fed has recently begun winding down its stimulus by reducing it for a second time to $65 billion a month. As this has kept mortgage rates at historically low levels, spurring investment, the respondents weighed in on when the central bank should end this stimulus.
"Mortgage rates have been riding a rally in U.S. Treasury securities caused by volatility in emerging markets in recent weeks, so the impact of Fed tapering on the housing market has been minimal thus far," said Pulsenomics founder Terry Loebs, who was also surveyed by Zillow. "More than 70 percent of the experts want to see the monetary stimulus reduced to zero before the end of this year, and the current pace of tapering will get us there. Of course, whether Janet Yellen's Fed will maintain the current pace as new economic challenges arise remains an open question."
Potential sellers also taking advantage
While investors are poised to sell in the coming years, so too are homeowners. Price gains have increased their equity, allowing them to put their homes on the market.
"Older homeowners are increasingly able to purchase a new residence with cash only after they sell their current home," said BBVA Compass economist Jason Frederick.
Those considering selling in the 2014 are encouraged to get the process started with a home inspection. These insights will help sellers price their homes, not to mention start searching for a new place.
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