As home sales continue to struggle, what’s clear is that the challenging start to the year wasn’t all due to the cold weather.
The Federal Housing Finance Agency, the new regulator for Fannie Mae and Freddie Mac, as well as the U.S. Department of Housing and Urban Development, announced Tuesday that they would loosen lending rules to make credit more available to Americans.
Whether this will take the sting out of rising interest rates and help the housing market for the remainder of the year is anyone’s guess. In the meantime, here are six trends you need to know if you stumble into a real estate conversation at your next neighborhood party:
Home prices are through the roof. Prices continue to rise this year, albeit at a slower pace than last year. The median existing single-family home price was $191,600 in the first quarter, up 8.6 percent from $176,400 in the first quarter of 2013. The median existing single-family home price increased in 74 percent of markets, as measured by the National Association of Realtors, with 125 out of 170 metro areas showing gains based on closings in the first quarter 2014, compared with the first quarter of 2013. The housing price bubble is especially pronounced in California and at the higher end of the market.
Cash is king. All-cash sales reached a new high in the first quarter. Some 43 percent of all U.S. residential property sales in the first quarter were cash-only purchases, up from 19 percent in the first quarter of 2013, according to Irvine, Calif.-based RealtyTrac.
Cash sales have become popular throughout the country, but are especially hot in large metro areas. They represent more than half of all sales in Miami, New York, Detroit, Atlanta and Las Vegas. The cash is coming mostly from smaller investors, some institutional investors and foreign buyers looking for second, third or fourth homes.
Millennials are left out of any housing recovery. Young people, who typically represent the bulk of first-time buyers, have amassed large debt loads and are struggling to find jobs or to make enough money to buy their first home. First-time buyers have represented roughly 40 percent of existing home sales, but in March, they equaled 30 percent. As a result, millennials are being forced to rent or live with their parents or other relatives longer than they imagined.
The mortgage market is sluggish. Mortgage credit availability was down in April, and until the end of April mortgage applications were at their lowest levels since December 2000, according to the Mortgage Bankers Association. As of April 25, both purchase and refinance application activity were down, with the refinance share of mortgage activity at its lowest level since July 2009.
There was a glimmer of good news at the beginning of May, though, as mortgage applications increased 5.3 percent for the week ending May 2, mostly due to purchases as opposed to refinancing. But total loan application volume continues to run 16 percent behind last year’s pace.
Still, jumbo loans are making a comeback. Loans worth more than $417,000 have grown substantially and lenders are trying to grab a slice of that market, with Wells Fargo, JPMorgan Chase and Bank of America all increasing their efforts to cater to wealthy homebuyers. Such jumbo loans are typically given to the most creditworthy borrowers and tend to be focused on the priciest markets such as Los Angeles and New York City.
New construction is slow. U.S. housing starts rose 2.8 percent in March compared to February, according to the Commerce Department, fueled by a 6-percent growth in single-family homes. But housing starts were down 5.9 percent from a year earlier and building permits, which indicates future construction, fell 2.4 percent in March from February – the fourth drop in five months.
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