Home Sales Hit 5 Year Low Despite Healthy Appetite from First-Time Buyers
An article by Colin Robertson of TheTruthAboutMortgage.com dated 3/13/2014
“A trio of reports released today by Redfin and Zillow revealed some rather conflicting information about the housing market.
While pretty much everyone agrees that were back on the right track, albeit tenuously, new data from Redfin reveals a spring slowdown in housing.
The online real estate listing service noted that home sales in Redfin’s 11 West Coast markets slipped 13.4% last month compared to a year earlier, marking a five-year low.
No, It’s Not the Weather…
We can’t blame the weather this time around because the notoriously warm West Coast performed worse than the rest of the nation.
In fact, home sales in Redfin’s other markets were down only 5.9% in February from a year earlier.
The hardest-hit metro was Las Vegas, where home sales in February were down 22.7% from a year ago. Sacramento, CA (-21.8%) and Ventura, CA (-20.8%) weren’t far behind either.
Of course, these very metros saw home prices rise enormously over the past 12 months so the issue is actually diminishing affordability, with both mortgage rates and home prices significantly higher than a year ago.
Today, Freddie Mac reported that interest rates on the 30-year fixed mortgage averaged 4.37%, up from 3.63% a year ago.
Additionally, national home prices were up 1.2% in February from January and 13% higher than a year ago.
The West chalked high double-digit gains (19.1%), while the rest of the country managed more modest gains of 7.4%. Many parts of the East Coast weren’t nearly as strong with year-over-year gains of only 2% in Long Island, 4.7% in D.C., and 6.6% in Boston.
So maybe the cold weather is to blame on the East Coast, but not on the Left Coast.
When we consider mortgage rates 1% or so higher and home prices 10%+ higher, it’s understandable why home sales are down.
However, inventory is up big in Phoenix (38.5%), Sacramento (23.9%), Riverside (22.8%), Ventura (22.1%), San Diego (18.6%), and Los Angeles (17.8%) compared to a year ago, which makes you wonder if buyers and sellers just aren’t on the same page.
Four Million First-Time Buyers Want In This Year
After all, a different report released today by Zillow indicated that more than four million first-time home buyers want to purchase properties this year.
The company said 8% of all households and 10% of current renters indicated that they plan to buy a home in the next 12 months.
Renters in Atlanta, Las Vegas, and Miami were the most eager to become homeowners in 2014.
If all the renters that told Zillow they plan to buy actually come through, it would represent more than 4.2 million first-time sales this year, roughly double the 2.1 million seen in 2013.
Additionally, an overwhelming share (90%+) of renters in 17 of 20 metros that indicated plans to buy said they were “confident” or “somewhat confident” they could afford a home.
So it’s unclear if affordability is actually the concern. It could just be that these individuals aren’t as willing to buy if home sellers don’t list their homes more reasonably.
The next couple months will be telling in terms of which way the market goes.
Redfin already expects March to be soft, with offers and home tours both down from year-ago levels, so something clearly isn’t right.
And Redfin was quick to point out that it’s data is the most current, with information collected just minutes after a sale, pending sale or listing activation.” ( End of Colin’s article.)
From Bob Phillips: Here in South Orange County the reason for a slow down is a bit more obvious. A year ago there were a LOT of cash buyer investors – more than 40% of sales -especially in the lower price ranges. Because price are now 20%+ higher, the bargains – which most cash buyers are interested in – have all but disappeared. There aren’t nearly as many bank owned or short sale listings, so, last year’s bargain hunters have picked the distressed properties carcass pretty clean. That leaves a higher inventory of houses, with higher interest rates, making things relatively unattractive, to almost all buyers, other than first timers.
Now, there ARE some sales happening in the higher price ranges, but most of those buyers were lucky enough to have some equity in their move up houses, that they were able to sell, before turning around to buy. Unfortunately, there are a LOT of potential sellers out there, who don’t have enough equity ( Or any equity at all.) to have a down payment for a move up property.
All in all, it seems like a fairly normal market here in South O.C.. Not especially attractive to either sellers, or buyers.