According to a recent National Association of REALTORS® report, the number of “existing” homes sold slipped to 4.92 million in March 2013 — a one percent drop from the month prior. While this is a slip, the number is still really good historically speaking. The bad news for home buyers is that the number of homes for sale remaining is scarce. The report stated that there are now fewer than two million listed homes nationwide.
We are back to bidding wars for homes in Orange County, LA County, San Diego County and the surrounding areas. The Bay Area and surrounding parts of Northern California are also experiencing bidding wars. Image
The bad news to the housing recovery is that many qualified borrowers are being priced out of the market quickly. Some homes are up over 30% in a year. We are seeing some listings receive as many as 40 offers. Homes are often selling well above listing price and above the recent sales. Rates are great, but the price increases are starting to push homes out of reach for those just beginning career paths.
The rapid jump in prices is also impacting appraisals. Appraisers are unwilling in many cases to bring in the values. Congress put many changes into the market a few years ago that has many appraisers scared to bring in values. As a result, appraisals are coming in below market prices. Buyers are willing to pay more, and appraisers are unwilling to reflect the price that the buyers are willing to pay. Home buyers are having to come in with the difference between the purchase price and the appraisal. This is not a problem for cash buyers, but again is a problem for many first time home buyers that are qualified, but lacking 20% down payments. VA and FHA buyers with limited down payments are struggling to make up the shortages between the purchase price and the appraisals. Realtors are aware of the appraisal issues, and less willing to consider buyers with limited down payments.
Home price increases may bring about more sellers in the future, but for now, the shortage of homes is driving up prices too quickly and putting many home buyers out of the market. The first time home buyer is especially impacted. We believe the first time home buyer is crucial to long-term sustainable growth. The market may rise for a few years, but sustainable growth will require conditions to change in our opinion.