Housing Recovery Ending? Not Yet
April 25, 2014
Several housing reports out this week have painted a picture of a sluggish start to the spring-selling season. New-home sales plunged 14.5 percent in March, reaching the lowest level in eight months, according to the Commerce Department. Existing-home sales posted a slight drop in March, falling 0.2 percent from February, but the sales volume was at its lowest point since July 2012, according to the National Association of REALTORS®.
So is the housing recovery ending? Not yet, housing experts say.
Several challenges persist: Low housing inventories, tight access to mortgage financing — particularly for first-time home buyers — and the decrease in housing affordability as home prices and mortgage rates rise, notes Rick Sharga, an executive vice president at Auction.com who used to be an exec at Carrington Mortgage Holdings and RealtyTrac.
Still, Sharga says the recovery remains on track. “This feels like a relatively normal market correction,” he notes in a column for HousingWire. “Prices rose rapidly and have stayed high due to limited inventory, causing affordability issues for potential home buyers. This has created a bit of a lull in terms of sales volume, but prices continue to go up, albeit more slowly. That, in turn, will create more positive equity and eventually result in more homes — existing and new — on the market, which will cause prices to soften, hopefully in tandem with somewhat more lenient lending practices.”
Lawrence Yun, NAR’s chief economist, also sees an uptick in housing in the months ahead.
“With ongoing job creation and some weather-delayed shopping activity, home sales should pick up, especially if inventory continues to improve and mortgage interest rates rise only modestly,” he says.
Source: “Rick Sharga: Is This the End of the Housing Recovery?” HousingWire (April 24, 2014) and “Home Sales Mark Sluggish Start to Spring,” REALTOR® Magazine Daily News (April 23, 2014)
Updated: June 22, 2018