For many people, the thought of springtime carries images of birds chirping, flowers blooming, and the notion of emerging from one’s indoor seclusion out into a blissful array of nature’s beauty. For the RE community, this thought also comes with the hope – and often expectation – that the market will be warming just as much as the weather. Unfortunately, this may not be the case this year, as a flood of recent data suggests that markets in CA and nationwide are getting off to a slow start this spring.
Reports from local real-estate agent groups in some of the markets that were the first to rebound, including San Diego, Phoenix and Las Vegas, show year-over-year declines in March home sales. Nationwide, pending home sales have fallen by 11% from the year before.
Not only have sales gone down, but fewer potential homebuyers are showing up at open houses. According to Credit Suisse, homebuyer traffic is down more than a 33% from March of last year.
The sluggish start to the spring home-buying season—a crucial period for sales because families typically want to lock into a school district by the end of summer—comes as investors cut back on purchases of homes that can be rented or flipped for a quick profit. Meanwhile, potential buyers are still adjusting to a sharp rise in both home prices and borrowing costs over the past year. With prices and mortgage rates up, the nation’s median monthly home payment—including principal and interest—has risen 20% in the last year.
“Overall, even after adjusting for weather, it has been worse than what most people expected,” stated Tom Lawler an independent housing economist in Leesburg, Va.
The slow start to spring is in some ways a tribute to just how swift the recovery has been these past two years. There are fewer distressed properties like foreclosures, and prices of those that remain are higher, so investors are buying fewer homes. At the same time, there has been a continued increase in the number of non-distressed purchases made by ordinary buyers and families, further reducing the inventory of homes for sale.
Whether or not the slow start to spring will carry over into the summer is still up in the air, but until we see a major change, it’s a safe bet that we won’t be seeing the same run-ups of last year.
Do you think this is just a periodic slump, or will the market remain stagnant throughout upcoming months? We’d love to hear your thoughts!
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