Housing's healing has reached the point where fundamentals and primary residence buyers are driving the market.

By John McManus

It’s official. It took six grueling years since the Great Recession ended, but now, the housing recovery enters the second half of 2015 as a fundamentals-driven rebound.

What does it mean now that housing – and its infinite mosaic of geographical fiefdoms down to the submarket and lot-line level – has healed its gravest wounds?

What does it mean to developers and builders that buyers and sellers of home properties are people to people, not desperate people to institutions?

What does it mean when we say that a housing cycle’s trajectory has moved decisively from a focus on investors’ resources to an exchange of values from owner-occupier to someone who wants to be an owner-occupier of a primary residence?

As we note from RealtyTrac’s latest U.S. Home & Foreclosure Sales Report for May, all of the benchmarks for abnormal residential real estate behavior – cash sales, distressed sales, bank-owned sales, and in-foreclosure sales – dramatically subsided in the past month and, even more dramatically so in the past 12 months.

• 24.6 percent of all single family home and condo sales in May were all-cash purchases, down from 28.5 percent in the previous month and down from 30.4 percent a year ago to the lowest level since November 2009
• The share of distressed sales dropped to a new low of 10.5 percent in May, down from 15.4 percent in April and down from 18.3 percent a year ago
• Bank-owned sales accounted for 3.9 percent of all residential property sales in May, down from 6.9 percent in the previous month and down from 9.0 percent a year ago

Properties that sold while in the foreclosure process – but not yet bank-owned – accounted for 6.6 percent of all residential property sales in May, down from 8.5 percent the previous month and down from 9.2 percent a year ago.

The market has spoken. It’s no longer rewarding investor opportunism, short-term gains for cash-flush buyers, nor quick flippers, nor even global “safe-haven” buyers who buoyed the marketplace as deterioration switched to resilience three years ago.

Owner occupiers, primary residence buyers – perhaps chastened into a mindset that homeownership and a financial investment are two different things – appear to be voting with their feet as to the sustaining values they're willing to put stock in.

This, along with another solid June jobs report this morning from the Labor Department, means that (builders) will be dealing with people who want to live in, rather than simply to resell, (their) homes.