REALTORS® report more buyer activity in their markets on the heels of lower mortgage rates, but still not enough inventory to match demand and concerns about housing affordability. Despite misgivings about low inventory and low housing affordability, the latest National Association of REALTORS® (NAR) survey of members, finds REALTORS® are broadly more optimistic about the housing market outlook for the next six months.
In NAR's latest REALTORS® Confidence Index (RCI) Report, REALTORS® reported inventory as "low" in most areas, especially for "fresh" and "affordable" listings. The RCI Report provides monthly information about real estate market conditions and expectations, including buyer/seller traffic, price trends, buyer profiles, and issues affecting real estate based on data collected in a monthly survey of NAR's members. The January 2015 report is based on the responses of 4,259 REALTORS® about local market conditions in January.
The 4,259 REALTORS® surveyed in January were optimistic about the spring season, with most reporting increased buyer interest in their markets. They cited the 30-year fixed mortgage rates now at below 4 percent and the reduction in FHA monthly mortgage insurance premium rates (by 0.5 percentage points) as reasons for their positive outlook. FHA has announced for loans originated starting January 26, 2015, it will charge a monthly mortgage insurance premium of 0.85 percent on the outstanding loan balance, down from 1.35 percent. Government-sponsored enterprises Fannie Mae and Freddie Mac also increased the maximum loan to 97 of the house's value, up from 95 percent.
The share of first-time home buyers declined slightly to 28 percent of existing home sales from 29 percent in December 2014. The share of first-time buyers was 26 percent in January 2014.
REALTORS® surveyed say first-time home buyers are still finding it challenging to obtain financing due to weak credit and income credentials and inability to come up with the required down payment. Majority of first-time home buyers make a "low" down payment. Among first-time buyers reported to be obtaining a mortgage in the months of November-January 2015, about 66 percent made a down payment of 6 percent or less.
REALTORS® expect prices to increase modestly in the next 12 months, with the median at about 3.2 percent. States with the most upbeat price expectations include the District of Columbia, Florida, and Nevada, where prices are expected to increase at about 4 to 5 percent. In most of the West Coast region and South Atlantic states, prices are expected to increase 3-4 percent. Realtors expect more modest price growth along the Midwest region from North Dakota to Oklahoma, possibly on account of the concerns about the effect of falling oil prices.
"We anticipate an uptick in sales during the traditional spring home buying season. The survey indicates among the 'young' age group of buyers there is a preference for renting than owning, possibly because they are still saving up for a down payment. The low mortgage rates and recent announcements by the FHA and the GSEs are likely to increase the access of borrowers to low down payment loans and make owning a home more affordable for responsible borrowers," said Chis Isaacson, president of the Silicon Valley Association of REALTORS®.
The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.
Variations of this article have appeared in local area newspapers.
For further information, please email or call the SILVAR office at (408) 200-0100.