Why is real estate market so sluggish?
Here's the question on every Realtor's mind: Why aren't buyers buying?
According to the National Association of Realtors, pending home sales were unchanged in January from the month prior. Regionally, sales were stronger in the South and Northeast, but they declined in the West and Midwest.
Since then, disruptive weather, limited inventory, rising home prices and rising interest rates have combined to slow pending home sales. Credit is tight and affordability has declined, according to NAR chief economist Lawrence Yun.
Yun says that increasing new construction "can quickly solve two problems, producing more inventory and taming price growth." The problem is that banks aren't lending to small production builders at the moment. Finding a lender who will finance 2 to 10 homes has been a challenge so steep many smaller home builders are sitting out the market.
The Zillow Housing Confidence Index (ZHCI), a forward-looking gauge of homeowner and renter confidence in the housing market, found that 4 million first-time buyers would like to become homeowners in 2014, but strong headwinds will delay many of those purchases, including concerns over affordability and lack of available inventory.
"Even after a wrenching housing recession, this data shows that the dream of homeownership remains very much alive and well, even in those areas that were hardest hit," said Zillow Chief Economist Stan Humphries. "But these aspirations must also contend with the current reality, and in many areas, conditions remain difficult for buyers. The market is moving toward more balance between buyers and sellers, but it is a slow and uneven process."
Americans intuitively understand that their dreams for homeownership may be in trouble. On Ilyce's radio show this past week, she asked her listeners why they thought homes weren't selling.
Several callers said the Great Recession continues for the vast majority of Americans. One caller said he's finding people don't have real jobs. "The unemployment rate is much higher than it being talked about." At the same time, he pointed out that banks have higher standards, which makes it tougher to qualify for a loan.
Another caller said that confidence in the government and the economy is still extremely low. It's hard to get excited about making a significant investment when you don't believe that the country is heading in a better direction, he said.
Near the end of the show, another caller said he was self-employed and his long-time personal banker discouraged him from even applying for a loan for a second home. "He said he'd have a hard time approving me." The same caller also had a tough time reapplying for his equity line of credit, even though he has a net worth of ten times the amount he wanted to borrow.
Whether the problem is a weak economy, slow employment growth, a lack of inventory caused by an estimated 10 million homeowners whose homes are still worth less than the mortgage owed, or the new qualified mortgage rules that make it harder to qualify, we should all be concerned about a slowing real estate market.
(Ilyce Glink is the creator of an 18-part webinar and ebook series called "The Intentional Investor: How to be wildly successful in real estate," as well as the author of many books on real estate. She also hosts the "Real Estate Minute," on her YouTube.com/expertrealestatetips channel. If you have questions, you can call her radio show toll-free (800-972-8255) any Sunday, from 11a-1p EST. Contact Ilyce and Sam through her website, http://www.thinkglink.com.)
(c) 2014 ILYCE R. GLINK AND SAMUEL J. TAMKIN. DISTRIBUTED BY TRIBUNE CONTENT AGENCY, LLC.