“We have taken an optimistic view that as investor demand starts to drop off, we’ll see improvement in organic demand,” Diggle said. “If we don’t see anything by the middle of the year, we’ll be changing our outlook.”
Builder Earnings
One sign things aren’t all bad: D.R. Horton Inc., the largest U.S. homebuilder by revenue, yesterday reported earnings and orders that beat analyst estimates. The company is experiencing “solid demand,” Chief Executive Officer Donald Tomnitz said. The shares jumped 8.3 percent.
The broader cooling trend follows a decade of market turmoil. The housing bubble, fueled by lax subprime lending from 2004 to 2006, led to the biggest bust since the Great Depression. Prices fell 35 percent from their July 2006 high and 5 million owners went through foreclosure, many of them still ineligible to qualify for a mortgage. After rebounding from a March 2012 low, the S&P/Case-Shiller index of 20 cities is at 2004 levels.
‘Flat-Lining’
The recent slowdown in sales is making Moody’s Analytics Inc. Chief Economist Mark Zandi “nervous” about his projection that job growth and wider credit availability will push existing-home sales up 5 percent and new-home sales up 40 percent this year.
“I hadn’t expected this type of flat-lining in the housing market for this long,” Zandi, who’s based in West Chester, Pennsylvania, said in a telephone interview. “Investors have driven the market since the turn, back in early 2012, and investor demand is petering out.”
Investors who swooped in to take advantage of low prices -- including companies such as Blackstone Group LP and American Homes 4 Rent buying homes to turn them into rentals -- have retreated as costs rise and fewer distressed properties come to the market. The share of individual investor purchases declined in March to 17 percent, the smallest for that month in data since to 2008, according to the National Association of Realtors.
Less Distress
Foreclosures and short sales, in which the borrower sells for less than what’s owed, accounted for 14 percent of March transactions, down from 21 percent a year earlier, the group said. The pipeline is shrinking, with mortgage delinquencies and foreclosure starts hitting their lowest points in March since 2007, according to Black Knight Financial Services.