“Why is quarterly home price growth now falling at such a rapid pace? According to Alex Villacorta, vice president of research at Clear Capital:
‘With waning investor demand [see chart below], higher rates of distressed sale activity mean that the housing market must withstand these distressed sales, which account for nearly one in four transactions.
‘Since the market fallout in 2006, home prices dramatically declined during sustained periods of rising distressed sales activity. Over the last two years, however, rising distressed sales have been offset by investor demand, which is not guaranteed to be present in 2014.’
“Despite the big fall in investor demand that occurred in January 2014, please note that it is not unusual to see rising levels of distressed sales activity during the winter months. However, as I explained in my January 2014 Timing Letter, Existing Home Sales – which is the best leading indicator of future housing market price trends – continues to signal a weakening housing market.”
[Campbell Real Estate Timing Letter, March 15, 2014, www.RealEstateTiming.com]