Even though mortgage rates have fallen to record lows and housing has become more undervalued relative to incomes than ever before, the number of home sales has continued to decline. More striking is that this is solely due to a weakening in demand from cash buyers and investors triggered by the more uncertain investment climate. Since January, the number of homes purchased by cash buyers and investors has fallen by 26%. Over the same period, purchases by first-time and repeat buyers have risen by 2%. Widespread negative equity and high unemployment are preventing first-time and repeat buyers from filling the hole left by cash buyers and investors.
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