We read with interest a variety of comments by Realtors nationwide on the state of the market when responding to A Realtors Confidence Index survey.
Comments received in April provided mixed messages—
- low available inventories in many areas,
- more buyers than sellers,
- market that is still producing sales but that also seems to have lost momentum,an active market in many areas (in some cases multiple bids) and a slowing market in other areas.
- Buyers were reported as increasingly cautious. (As we know, all real estate is local, so the summary of the comments has many exceptions to it based on regional differences and the underlying economies.)
- Weather, higher prices, and credit availability/interest rates were mentioned as problems.
- In some areas, REALTORS® noted low consumer confidence coupled with problems in the local economies.
- The overall message from REALTORS® was that the housing markets are cautious, and demand is slower but still substantial.
The market has slowed. In particular, buyers are reported as resistant to higher prices, are more demanding, extremely cautious, and looking for properties in perfect condition. In many cases buyers are approaching sellers markets as if they were buyers markets, offering unrealistic and unobtainable prices.
Limited inventories are reported as a major problem. An exceptionally large number of respondents noted that inventories of available homes were very low. This was reported to be a major problem.
REALTORS® reported credit availability as very tight with unrealistic underwriting standards. REALTORS® reported that cash is king: a cash offer or large down payment has a major impact on contract acceptance. REALTORS® repeatedly reported that good clients were having trouble qualifying for mortgages. Many good credit clients were reported as being unable to buy a home due to unrealistically high credit standards.
Appraisals continue to slow/kill contracts. Appraisals have again shown up as a major issue. In particular, there was concern that current appraisals do not reflect changing and improving market conditions. Appraised values were reported as coming in too low. In addition, there was major concern in some cases about the lack of knowledge of local conditions by the appraisers.
A number of regulatory problems were reported as impacting the real estate markets:
- FHA and VA condo financing—seen as a problem in a number of cases.
- Flood insurance—Mentioned by a number of respondents even though premium issues have been to some degree ameliorated.
- Dodd Frank debt ratios—reported as unrealistic for a number of clients, preventing sales from going through for credit-worthy clients.
Here is a breakdown of sales by type of buyer:
- Sales to First Time Buyers: 27 Percent of Sales
- Cash Sales: 32 Percent of Sales
- Sales for Investment Purposes: 16 Percent of Sales
- Relocation buyers: 14% of market
- Second home buyers: 10% of market
- Distressed sales: foreclosure 8% short sales 3% (foreclosures sell at 18% average discount)
- International buyers: 2% of sales
We will publish the Pasadena June report in early July. Call or write with questions or comment about any of this, or any other real estate issue.
Source: National Association of REALTORS®