Housing demand continues to increase as buyers of all ages tread the waters of home shopping, but real estate agents aren’t as busy writing offers and the key driver for this trend, according to a CNBC report, just might be prices.
Buyers continue to request tours and visit open houses at the same rate as they did in May, but fewer are making an offer. According to Redfin, real estate brokerage which surveyed 15 major metropolitan housing markets, 11 percent fewer potential buyers made offers in June, compared to May. According to Nela Richardson, chief economist at Redfin the same trend is occurring throughout much of the nation.
“In this market, home buyers have to move fast, yet high prices and low inventory are slowing down even the most earnest of house hunters. Buyers toured in full force last month, even though there were fewer homes hitting the market. New listings fell 3.3 percent from May and were down 1.6 percent from a year ago. Faced with a low supply of homes for sale and extremely competitive conditions, many home buyers are struggling to make it to the offer stage.”
As buyers continue to shy away from putting pen to offer paper, Richardson noted the trend likely flowed into July as mortgage applications to purchase a home dropped for three of four weeks according to the Mortgage Bankers Association.
And to compound problems, Redfin is reporting that supply continues to tighten. It found down 12 percent in June compared with a year ago in the markets it covers. However, the U.S. Census Bureau, in a wider survey, found that the supply of existing homes, on a per capita basis, came in during the second quarter at the lowest level since 1982, when the government began tracking this data.
Javier Vivas, manager of economic research at Realtor.com, pointed out that while the supply of homes for sale in July was down 11 percent annually, homes were selling on average four days faster. He pointed out that typically the housing market slows in summer and prices drop slightly, but it hasn’t worked out that way this summer.
“Homes are not only selling faster than last July, but faster than last year’s peak months. However, quick sales don’t necessarily mean more sales, particularly when there isn’t enough inventory as is currently the case. Home prices also remain stubbornly high, failing to show hints of the usual seasonal cool-down. Low and moderately priced homes are being snatched up especially quickly, keeping many would-be buyers from being able to get into the market.”
Another worry is that home prices in some key markets are overvalued, driving fears of a housing bubble. Agents have taken solace in the fact that mortgage rates have remained low. With signals that they could increase by year’s end, that could move even more would-be buyers out of the game.