Home sales across all price points are beginning to suffer, with stale demand moving from lower-priced homes to middle- and higher-priced homes as well, according to CoreLogic’s (CLGX) MarketPulse report for July.
Deputy chief economist Sam Khater said that this is a reflection of weakening home sales that originally began at lower-priced segments, but are now moving up the price continuum to the higher-priced segments.
“It is well known that higher-end home sales activity has been strong over the last two years, however, recently there’s been a shift, from both directions. Not only have higher-end home sales themselves started to weaken over the last few months, but the weakness in the lower-end segment is expanding into the upper-middle segments of the price distribution,” Khater said.
Sales of higher-end priced homes picked up steam in early 2012, reached an apex later that year and grew at a healthy clip until very late in 2013, when weakness began to emerge.
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The very low-end price segment was weak throughout 2013, and that weakness started to expand upward in the second half of 2013. For example, home sales in the $350,000 to $550,000 price range were up 44 percent on a year- over-year basis as of July 2013, but just four months later, they were only up by 9 percent in November.
“Weak sales at the very low end was not a surprise, given the stagnant economy combined with declines in the number of distressed sales and very high home price appreciation for low-priced properties,” Khater said. “However, the migration of the slowdown in sales beyond the lower-middle of the price distribution is a concerning development given that higher-priced home sales had been one of the few bright spots in the real estate sales market over the last few years.”
Khater said that if the slowdown continues heading into the fall, it indicates that the higher-priced market is entering a new phase where the generally low-rate environment and rapid increases in the stock market are still not enough to power home sales increases.