More news on housing today coming out of Washington. I thought this bit of news was important to share with everyone. Sales are up for sure as I am definitly more busy. But, who is doing the buying...first time home buyers???? No, read on!
Rich Kemper
REALTOR, Keller Williams Realty
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I don’t work from 9 to 5. I work from start to close!
Investors snap up cheap homes, new buyers miss out
The number of first-time buyers fell last month to the lowest percentage in nearly two years, while all-cash deals have doubled and now account for one-third of sales.
A record number of foreclosures have forced home prices down in most markets. The median sales price for a home fell last month to its lowest level in nearly nine years, according to the National Association of Realtors.
Lower prices would normally be good for first-time homebuyers. But tighter lending standards have kept many from taking advantage of them. With fewer new buyers shopping, potential repeat buyers are hesitant to put their homes on the market and upgrade.
Cash-only investors are most interested in properties at risk of foreclosure. They can get those at bargain-basement prices.
“The cash-rich investors can come in and get foreclosed properties at incredibly favorable prices,” said Paul Dales, senior U.S. economist for Capital Economics. “The average Joe can’t take advantage because they simply cannot get the credit to buy.”
Sales of previously occupied homes rose slightly in January to a seasonally adjusted annual rate of 5.36 million, the Realtors group said Wednesday. That’s up 2.7 percent from 5.22 million in December.
Still, the pace remains far below the 6 million homes a year that economists say represents a healthy market. And the number of first-time homebuyers fell to 29 percent of the market – the lowest percentage of the market in nearly two years. A more healthy level of first-time homebuyers is about 40 percent, according to the trade group.
Foreclosures represented 37 percent of sales in January. All-cash transactions accounted for 32 percent of home sales – twice the rate from two years ago, when the trade group began tracking these deals on a monthly basis. In places like Las Vegas and Miami, cash deals represent about half of sales.
In the three states where foreclosures are highest, at-risk homes make up at least two-thirds of all sales. In Florida, 63 percent of sales in January involved homes that were at risk of foreclosure, according to a Campbell/Inside Mortgage Finance survey. And in Arizona and Nevada, a combined 72 percent of sales involved those homes at risk of foreclosure.
A major barrier for first-time homebuyers is tighter lending standards adopted since the housing bubble burst. These have made mortgage loans tougher to acquire. Banks are also requiring buyers put down a larger downpayment. During the housing boom, buyers could purchase a home with little or no money down.
The median downpayment rose to 22 percent last year in at least nine major U.S. cities, according to a survey by Zillow.com, a real estate data firm. That’s up from 4 percent in late 2006 – as the housing bubble began to burst. The cities included some of the nation’s hardest hit markets – Las Vegas, Phoenix and Tampa, Fla. – as well as areas that are rebounding, including San Diego and San Francisco.
That has prevented many from buying, even when the median price of a home fell in January to $158,800. That’s a decline of 3.7 percent from a year ago and the lowest point since April 2002.
“If you can get the financing, it’s a great time to buy a home with prices this low,” said Patrick Newport, U.S. economist with IHS Global Insight.
Many potential buyers who could qualify for loans are hesitant to enter the market, worried that prices will fall further. High unemployment is also deterring buyers. Job growth, while expected to pick up this year, will not likely raise home sales to healthier levels.
With mortgage rates rising, mortgage applications have been volatile. They’re now near their lowest levels in 15 years. Economists say it could take years for home sales to return to healthy levels.
“Home prices continue to languish,” said Steven Wood, chief economist for Insight Economics. “Any recovery will be difficult to sustain given the still-large supplies of homes for sale and distressed properties.”
One obstacle to a housing recovery is the glut of unsold homes on the market. Those numbers fell to 3.38 million units in January. It would take 7.6 months to clear them off the market at the January sales pace. Most analysts say a six-month supply represents a healthy supply of homes.
Analysts said the situation is much worse when the “shadow inventory” of homes is taken into account. These are homes that are in the early stages of the foreclosure process but have not been put on the market yet for resale.
For January, sales were up in three of the four regions of the country led by a 7.9 percent rise in the West. Sales rose 3.6 percent in the South, 1.8 percent in the Midwest and down 4.6 percent in the Northeast.
The January increase was driven by a 2.4 percent rise in sales of single-family homes. It pushed activity in this area to an annual rate of 4.69 million units. Sales of condominiums rose 4.7 percent to a rate of 670,000 units.
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