The run-up in house prices over the past year along with higher mortgage rates has pushed many potential buyers out of the market, according to Rick Sharga, executive vice president at Auction.com.
“A lot of people don’t have the cash for a downpayment,” he said. And FHA-insured loans are not a viable alternative for some buyers because the premiums have become so expensive.
“Affordability is a real issue for a lot of buyers today and that translates into a shortage of customers for mortgage companies,” Sharga told NMN.
Meanwhile, the refinancing business continues to decline. And the implementation of the qualified rule early next year will tighten credit.
“I think the first quarter is really going to be a bear for the mortgage companies,” Sharga said.
The Auction.com executive expects 2014 will be another year of recovery with slow growth in home sales. “Over the year, you will see lending standards loosen up,” he said.
Meanwhile, institutional and individual investors will continue to buy distressed properties with cash. “They will keep the market moving forward,” Sharga said, and keep home prices moving up. “They are still serving a useful purpose,” he added.
Auction.com is an online real estate marketplace for buyers and sellers based in Irvine, Calif.