According to The Wall Street Journal, the sharp increase in home prices in some of the hardest-hit housing markets is likely to fade in the coming months as investors leave the market.
Three markets in particular—Phoenix, Las Vegas, and Sacramento, Calif.—have witnessed surprisingly strong home-price inflation over the past 18 to 24 months.
The rally began in early 2012 after investors aggressively bought up cheap foreclosed homes that can be rehabbed and flipped to end users or rented out to those who aren’t ready or able to buy, clearing an overhang of distressed properties. Meanwhile, many traditional buyers couldn’t sell their properties because they owed more than their homes were worth, keeping inventories very lean. As home prices warmed up and interest rates fell to rock-bottom levels, traditional buyers got in on the game, releasing pent-up demand.
