Mortgage rates are low; home prices are increasing at a slower pace, the job market is strengthening. So many positive indicators, but still there not enough buyers around. The monthly sales figures are much less than last year. Why? Because homes are still unaffordable, especially for an average buyer.
The chief economist of a reputed real estate website told the press that price gains may have slowed, but at a national level, prices still continue to rise. He said that among the top 100 metros, 97 reported gains that have been the greatest ever since recovery began. As for last month, that is when the gain was the highest to be noted in the past 16 months. The recorded month-over month value was 1.2%.
It was in 2013 that prices began to rise significantly due to investors increasing the real estate market. They bought many homes and turned them into rental units. Home prices rose in all major areas where these investors were present. In smaller local markets, there were not so many investors but the low inventory levels called for gains. Bidding wars began, and houses started becoming unaffordable for people at the lower end of the market. According to real estate agents, today’s sellers are not practical and do not consider the affordability of buyers while deciding on an asking price.
The chief economist of another real estate website said that 40% sellers are going to list their properties at prices above market values. He added that it is not until after six or nine months have passed that sellers consider a price change. In the past few years, there have been so many variations in prices that even sellers are not sure about the worth of their homes anymore.
The investors are finally beginning to move out, but can the market get back on its previous path? There are many regular buyers around, but mortgage applications have not risen. In fact, compared to last year, they have fallen by 10%. The shortage of homes is still there, but a tighter mortgage market does not allow sellers to ask for any price they want.
The president added that around 25% of their agents think it is a seller’s market. With homes becoming unaffordable, buyers are just walking away and sellers have no one to sell their homes to.