WE’RE HEARING that everything may not be so rosy in the housing market.

Investors have been a major force in the housing recovery—buying REO for cash and turning the single-family homes into rentals.

Investors account for roughly 20% of existing home sales and private equity firms have gotten into the act over the past two years.

But economists at Wells Fargo Securities have noticed that the supply of “preferable distressed properties” is running thin and there could be pullback coming.

The “tell” is that some investors are purchasing homes directly from builders.

“We believe the recent interest in newly built homes by institutional buyers, mostly equity firms and pension funds, is a sign that investor purchases are topping.”

A pullback by investors, according to the WFS Housing Data Wrap-Up report, would make the market more reliant on traditional buyers that need mortgage financing.

So far, traditional “buyers are not coming back as strongly as the rebound in sales and home prices suggests,” the March 7 report says.

While it is difficult to gauge the impact in prices, the WFS economists say a “significant pullback by institutional investors would likely result in much smaller gains in median house prices.”

(For all of 2012, the median existing home price was $176,000, up 6.4% from 2011, according to the National Association of Realtors.)

But a pullback would have less impact on the S&P Case-Shiller house price index and the Federal Housing Finance Agency HPI.

Despite this note of caution, the WFS economics group expects continued improvement in sales, prices and new home construction this year. “We had previously felt that most of the risks to our forecast were to the upside, however, and now feel the risks are more balanced.”

But over at Bank of America Merrill Lynch, the analysts see nothing but blue skies. The housing market is gaining momentum and house price gains could be up 8% by yearend. That would top the 7.3% gain in the national S&P Case-Shiller HPI in 2012.

“We believe a positive feedback loop has begun, where the rise in prices fuels expectations of further appreciation and easing credit conditions, which in turn stimulates home buying,” the analysts say in the March 7 report.

They note that increasing demand for housing and the low supply of homes for sale will keep prices moving up. The title of the B of A/ML report is “Someone Say House Party?”

WELCOME ABOARD: Our latest What We’re Hearing blogger is John McDermott, who is that rarest of creatures—a lawyer who can write. John’s initial blog for us centers on a large lender he wouldn’t name (think stagecoaches) that gave out a coupon for meat to an inconvenienced borrower. If you would like to “meat” John, who has conducted the Loan Closer column for Origination News for a number of years, here is where you would do it. This makes our WWH roster Ted Cornwell on Mondays, Bonnie Sinnock on Tuesdays, Garth Graham on Wednesdays, John McDermott on Thursdays and Brian Collins/Mark Fogarty on Fridays.

MOST EMAILED: People in the mortgage business have been hungrily watching out for good news for years now. So it’s no surprise our most emailed content of the week should be very good news indeed, a report that by the end of this year, home prices should be rising in just about every major metro area in the country. The content is by Amilda Dymi.

SHOUT OUT: We’ve been giving shouts out to those companies who are helping the mortgage business out of the doldrums by hiring. Our bright line has been ten net new hires but we have had to be flexible. This week, for instance, we give a shout out to a company that has just hired nine people. That’s DocuTech, out of Idaho Falls, Idaho. The new hires are for the implementation, professional services and support teams as DocuTech has picked up some additional clients this year. Six of the nine are from the local Idaho area. The firm provides mortgage compliance and documentation technology.

OH, THOSE VINERS: Got to love the posters at MortgageGrapevine.com. We can always get a smile out of a visit to the Vine. Even the handles our posters take for themselves are funny. So for instance while we are no fans of Sean Hannity, we could never have come up with the moniker BURY SEAN HANNITY AT WOUNDED KNEE. We have been to Wounded Knee, by the way, and the wooly headed Fox commentator would not be a good fit for that sacred resting place when his time inevitably comes. But the name is funny. And while a scan of the latest threads shows a high level of engagement with political and sports questions, the occasional mortgage question sneaks in. This one here queries what the best stress-bustin’ go-to drink is a Viner’s favorite. Our favorite response? The one who says it is a Ketel martini. The small handicap of not liking olives isn’t a game changer, as they are making a valiant and repeated effort to learn to like olives!

Mark Fogarty is editorial director of the SourceMedia Mortgage Group and has been commenting on the mortgage market since 1984. Brian Collins is the group’s senior editor and D.C. bureau chief. He has worked the mortgage beat since 1988.