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Competition cooling off for homebuyers

By Judy Martel ·
Wednesday, February 12, 2014
Posted: 2 pm ET

Homebuyers may have an easier time this spring, with less competition from investors, according to a Zillow survey of 110 economists, housing experts and investment strategists.

Homebuyers will have less competition from investors this spring.

Potential homebuyers will see prices stabilize more as investors leave the market.

"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 solace, given the higher prices and mortgage rates that they will encounter," Zillow's chief economist, Stan Humphries, said in a prepared statement.

Humphries said investors played an important role in stabilizing the market during the depths of the housing crisis, by purchasing homes, fixing them up and renting them. However, as buyers have emerged in the years since, competition with investors has driven up prices rapidly in sought-after areas of the country. As investors exit the market, potential buyers will see more price stabilization.

Investors are also losing interest because of the smaller inventory of distressed homes. A year-end report from RealtyTrac notes that foreclosure filings declined 26 percent in 2013 from a year earlier and by 53 percent from the peak in 2010.

According to the Zillow survey, home values are expected to appreciate by 4.5 percent nationwide through the end of this year. That's more than the typical appreciation rate of 3 percent per year, but the rate is expected to slow to approximately 3.8 percent next year and 3.3 percent by 2018.

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