The spring home selling season started off slow, real estate agents reported in a monthly outlook survey.
Potential buyer traffic dropped, but price expectations and listing activity both were up, according to Credit Suisse’s monthly survey of 1,200 real estate agents’ perceptions of traffic, inventory and prices.
Mortgage market conditions continue to impact real estate activity, as many agents reported that the threat of rising interest rates is getting potential buyers off the fence.
“People are hearing the market is better this year. Rates are still low, under 5%,” one agent in Denver said. “Buyers are tired of waiting. However, prices still have to be at or below what the buyers think the market is.”
The traffic index reading was 37.5 in March, down from 42 in February. A reading below 50 indicates traffic levels were below agents’ expectations, as buyers chose to wait for more signs of balance in the market, wrote lead analyst Daniel Oppenheim. The traffic index had increased four consecutive months, before its March decline.
“Agents continued to note the wide divide among potential buyers, with the most distressed markets finding significant investor interest, whereas buyers in other markets are still cautious and plan to wait for home prices to bottom,” Oppenheim added.
The home price index increased one point to 30.6, the fifth month of increases (though the level below 50 still indicates prices are below expectations). After dropping nearly six points to 35.1 in February, the home listing index increased to 38.8 in March.
Other mortgage factors are hurting potential sales, as the market deals with more stringent requirements for Federal Housing Administration-backed loans.
“Increasing FHA requirements are killing some first-time buyers; the market is finding new mortgage products to offer,” an agent in Dallas said.
Another agent, representing New York and Northern New Jersey, mentioned that “banks are getting more stringent and flat out denying mortgages,” adding to the pressure on buyer traffic.
The financing woes aren’t limited to single-family homes. In Jacksonville, Fla., agents reported that potential buyers are finding it difficult to obtain condo financing.
“Many condos are no longer eligible for financing, putting great values out of the reach of regular homebuyers who would most benefit and could clean up a lot of the inventory and lead to the condo market recovery,” an agent said, adding, “Investor activity is increasing.”
Macroeconomic conditions are impacting activity in places like Houston, whose economic lifeblood is still rooted in the oil industry. Agents who saw better traffic primarily cited either relocation demand or the fear of rising mortgage rates as the drivers, Credit Suisse said, adding that improvement in the oil industry would likely continue to boost relocations and lead to a pick up in overall activity.
“Plenty of transferees coming through, but the locals are not moving much,” a Houston agent reported.
In Charlotte, a high level of inventory is putting downward pressure on prices, but buyers are still not surfacing, creating longer selling periods, leading one agent to comment, “The biggest problem now is appraisals.”
