Daily Real Estate News | Friday, January 20, 2017
1. Low inventories: There aren’t enough homes for sale and inventory woes are expected to worsen this year. Active inventory in December 2016 on realtor.com® dropped 11 percent compared to a year ago. “As a result, the year has started with the lowest inventory of homes for sale at least since the recession, and possibly in decades,” realtor.com® notes. “Inventory was a challenge all year but a stronger offseason in the fall depleted the available homes for sale even more than is typical.”
2. Prices move to record highs: Typically, asking prices decrease in the fall. However, this year, the median list price in December was the same as it was in July — $250,000. That is a record high for December. It’s also a year-over-year increase of 9 percent.
3. Rising mortgage rates: For experienced buyers, rising mortgage rates has prompted an urgency for them to buy before any further increases. Average listing views on realtor.com® surged 40 to 80 percent in the last three weeks of December 2016 compared to December 2015. “Rising rates have made demand even more intense,” realtor.com® notes. However, the demand mostly seems to be coming on stronger from repeat buyers. For first-time buyers, rising mortgage rates are having an opposite effect and they’re showing signs of beginning to shy away from the market.
4. First-Timers Are Worried; Repeat Buyers Are in a Rush: The number of first-time buyers planning to purchase this spring has dropped sharply and the rise in mortgage rates over the past few weeks may be to blame for their retreat, according to realtor.com® study. Repeat buyers, on the other hand, want to lock in rates right away.
Forty-four percent of active home buyers who plan to buy a home this spring are first-time home buyers, down from 55 percent last fall who said they were planning to buy in the spring. So what’s spooking them?
The average 30-year fixed-rate mortgage has gone up to more than 4.2 percent by the end of December 2016, realtor.com® notes. It was averaging 3.4 percent for most of September 2016. Average rates today are about a half percentage point higher than they were in 2016. That means a median-priced home financed with a 20 percent down would cost an extra $720 per year in added interest, realtor.com®’s study notes.
“Last fall, we saw a large jump in the number of first timers planning home purchases, which was very encouraging because their market share is still well below pre-recession levels,” says Jonathan Smoke, chief economist for realtor.com®. “But, as evidenced by their decline in share, first-time buyers are really dependent on financing and affordability is one of their largest barriers to home ownership. This number could continue to decline with anticipated increases in interest rates and home prices.”
First-time buyers are nearly five times more likely than repeat buyers to say they are facing challenges qualifying for a mortgage. Affordability topped first-time buyer concerns.
In November, first-time buyers made up 32 percent of all buyers, according to the National Association of REALTORS®.
“The rise in rates is associated with an anticipation of stronger economic and wage growth, both of which favor buyers,” added Smoke. “At the same time, higher rates make qualifying for a mortgage and finding affordable inventory more challenging. The decline in the share of first-time buyers since October suggests that the move up in rates is discouraging new home buyers already.”
On the other hand, repeat home buyers realize mortgage rates – while moving higher overall – are still at historical lows. Before rates jump more, these buyers are in a rush to close before rates increase further, according to realtor.com®’s study.
Source: Move.com
“Copyright National Association of REALTORS®. Reprinted with permission.”