Homebuyer Demand Near Standstill

Before you go, we thought you'd like these...
Before you go close icon
A continued heavy supply of homes on the market has brought home purchases almost to a standstill, despite low housing prices and low interest rates, say some industry pundits. Meanwhile, a declining clan of buyers are faced with unemployment, tight mortgage restrictions and the expiration of the tax credit.

"The market, right now, is a veritable case study of the law of supply and demand," according to a recent report from real estate data provider Altos Research. "Right now, there's a whole lot of supply, but very, very little demand. The buyers that drove a flurry of activity during the spring have left a deafening silence in their wake."

According to its 10-city composite index, there were 311,742 houses in inventory in July, up 2.2 percent from the previous month and up 3.8 percent over the last three. It seems that people who are shopping for a home just aren't buying fast enough to deplete inventory at the rate in which sellers are putting homes on the market.
Thomas Meyer, CEO of J.I. Kislak Mortgage, believes that the housing market right now is bumping along the bottom with bargain hunters and "traditional buyers" such as new families, and move-up buyers needing a bigger house.

"High unemployment has certainly had a dampening effect, but that runs up against the psychological orientation that now is the time to get a deal, [given] low housing prices coupled with low interest rates," he told HousingWatch. "Unfortunately, many shoppers are running into the very restrictive and conservative underwriting orientation today and can't qualify for a mortgage loan."


Pending home sales have been edging downward with near-term sales expected to be notably lower in contrast to the spring surge, when buyers rushed to take advantage of the homebuyer tax credit, according to the Pending Home Sales Index released in August by the National Association of Realtors.

Search Homes for Sale
Browse through photos of millions of home listings or search foreclosure listings
"All year we've been seeing relatively flat national home prices, which appear to be supported by market fundamentals," said Lawrence Yun, the chief economist for the NAR. "Prices in some areas remain below replacement construction costs, so even with an elevated supply of existing homes on the market we don't expect any consequential movement in home prices for the foreseeable future."

Some real estate agents, however, think that the summer drop-off is part of the typical seasonal change of the market. "Some of the [decline in demand] is driven by the fact that we are closer to Labor Day," says John Butler, a Keller Williams agent in Minneapolis. "People are on vacation or getting kids ready for school. It is not uncommon to have a little bit of activity slow-down this time of year. Historically, there has always been a little bit of pickup in the fall. In the winter, obviously, activity slows," he says.

Everyone recognizes, however, that it is still a great time to buy if you can get the financing. On a national average, 30-year fixed-rate loans are still under 5 percent, according to the Mortgage Bankers Association. And the national median existing single-family price was $176,900 in the second quarter, up only 1.5 percent from $174,200 in the same period of 2009, reports the NAR.


More on AOL Real Estate:
Find out how to calculate mortgage payments.
Find homes for sale in your area.
Find foreclosures in your area.
Get property tax help from our experts.


************************************************

Want to learn more about home buying and home finance? If so, you won't want to miss
our online discussion with industry experts,
"What Works Now: Smart Moves When Buying a Home,"
created by AOL Real Estate in participation with Bank of America Home Loans.
Watch it now on AOL Real Estate.
Read Full Story

Find a New Home

Buy
Rent
Value
Powered by Zillow

From Our Partners