We discussed real estate market trends and forecasts in a recent Great Real Estate post. Here’s an article about those real estate market trends, taken in part from an article written by firstname.lastname@example.org.
Home prices are not rising as fast in most metropolitan areas as they did earlier this year and much of 2012. Multiple-bid competitions — fierce in many places this spring and late last year — aren’t as intense in many markets. Inventories of homes for sale have increased this summer, reversing near droughts of listings that helped fuel higher prices. Add in rising mortgage rates, and you’ve got a distinct, measurable momentum shift in the pace of the nationwide housing recovery. Real estate revival motion is still well underway — it’s just not as effervescent.
Consider some key numbers:
• Asking prices for homes declined one-third of a percent in July, the first drop on a monthly basis since last November, according to data compiled by Trulia.com.
• Pending home sales — homes in escrow but not yet closed — dropped four-tenths of a percent in June, according to the National Assn. of Realtors.
• Resales of houses in June declined 1.2%.
• The number of homes for sale rose in a number of the hottest markets recently. Plentiful inventories give home buyers more to choose from and tend to calm things down. According to data compiled by Realtor.com, inventories rose 7.8% during July in Los Angeles, for example.
• Not as many potential buyers are out shopping, Redfin measured a 3.5% drop in home showings by its agents last month.
• Signed offers were down 11% in July compared with June. Plus, the number of multiple-bid competitions is dropping in major markets — down 5.3 percentage points from June to July alone.
• Affordability is beginning to erode as the result of cumulative home price increases plus higher mortgage interest rates. The National Assn. of Home Builders’ housing opportunity index from August found affordability down 4.4% from the previous quarter. The index measures the percentage of households that can afford to buy the median-priced home with a 10% down payment.
None of this is surprising — or alarming — to housing and mortgage economists who track market movements. Frank Nothaft, chief economist for Freddie Mac, the big mortgage investor, believes that the recovery is simply moving into a “second, more sustainable” phase. During the last 18 months, he said, “we saw eye-popping numbers” on home prices and sales, though the outsized increases were coming off the lows of a deep recession and housing bust.
But price gains in the double digits that were commonplace in coastal California, Phoenix, Las Vegas, Washington, D.C., and parts of Florida starting two years ago have gradually begun to self-correct. Demand decreases and price increases slow down when prices get out of reach of growing percentages of buyers. That’s the trend taking hold now, Nothaft said. Sales should continue to see “healthy” growth and prices should continue to rise, he said, “but the percentages will be less.”
The second phase of the recovery actually started earlier this year, said Jed Kolko, chief economist for Trulia, “When inventories began bottoming out.” Kolko sees the current, more moderate phase continuing for what could be an extended period.
But the true housing market potential won’t fully be realized, he said, until the next phase. That’s when the consumers who have been missing in action thus far — younger, first-time home buyers stymied by the economy and student loan debt burdens and often still living with their parents — finally jump into the marketplace and start buying homes.
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We have seen the increases since this article was posted, and just now are seeing more younger, first-time buyers jumping in!
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