The July 2014 Realtor Confidence Index shows that Realtors aren’t enthusiastic about current conditions and the outlook for the next six months.
Concerns about federal regulations burdening the process, the drop in demand for middle and lower-cost homes, and rising affordability problems headlined their concerns.
Realtors reported some uptick in inventory in some areas, but generally, supply remained tight relative to demand in many areas, especially for “lower” and “middle-priced” homes, according to the July survey conducted by the National Association of Realtors.
Distressed sales continued to account for a smaller share of the market.
Realtors continued to report about the restrictive effects of the current credit conditions, especially in relation to the credit score and down payment requirements that will qualify buyers for a mortgage.
The home buying process was reported to be “long and difficult” even for “quality borrowers”.
Although the home price recovery has encouraged more listings, the strong price growth amid modest wage income gains has also made homes less affordable, creating a demand for lower-priced homes that are, unfortunately, in short supply.
Changes in the Federal Housing Administration mortgage insurance premium regulations, the cost of obtaining flood insurance, and increases in property taxes were also reported to be having a negative impact on potential sales.
FHA financing regulations continued to be reported as severely impeding condominium sales.
Confidence about current market conditions declined across all markets in July 2014 compared to June 2014.
In the single-family market, the Realtors Confidence Index - Current Conditions for single-family homes dipped to 60 (62 in June), indicating that a smaller percentage of Realtor respondents viewed the market as “strong” compared to a month ago.
Overall it's not pretty.
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Confidence about the outlook for the next six months similarly declined in July compared to June. The six-month Outlook Index for single-family homes fell to 60 (63 in June); the index for townhouses edged down to 45 (46 in June); and the index for condominiums dropped to 40 (41 in June).
Tight inventory, difficulties in obtaining mortgages, and weak job growth were the main concerns reported by Realtors.
In some areas, the uncertainty about flood insurance rates, and the increase in property taxes were also cited as adversely affecting sales. FHA condominium accreditation/financing regulations continued to adversely impact condominium sales.
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The Buyer Traffic Index declined in July to 55 (58 in June). Meanwhile, although inventory is improving, supply is still broadly tight: the Seller Traffic Index is still below 50 and essentially stayed flat at 45(44 in June) 3.
An index above 50 indicates that more than half of Realtors view traffic conditions as “strong”.
Realtors reported some uptick in inventory, but supply remained tight relative to demand in many areas, especially for “lower” and “middle- priced” homes.
There were reports that some potential sellers are hesitant to sell because of concerns that they will not find an affordable replacement home with adequate mortgage financing in a tight market.
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Other potential sellers are waiting for further price increases either to increase the equity gain or to move out of a negative equity position.
NAR also tracks foot traffic using Sentrilock, data. Lockboxes made by SentriLock, are used in roughly a third of home showings across the nation.
This index rose to 54.8 in July (42.5 in June), which indicates that more than half of the roughly 200 markets tracked in this panel reported an increase in foot traffic in July.
Fewer Realtors reported rising prices than was the case in J une, but home prices are still broadly rising. Approximately 65% of Realtor respondents reported that the price of their “average home transaction” is higher today compared to a year ago (68% in June).
About 23% reported constant prices, and 12% reported lower prices. Tight inventory has sustained the price growth in many areas.
With inventory still generally tight and multibidding prevalent, approximately 14% of reported sales were at a net premium compared to the original listing price. In mid-2013, about 20% of Realtor respondents reported selling properties at a premium. About 70% of properties sold at a discount compared to the listing price, with about half reporting a discount of 0 to 10%.
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Realtors responding to the survey expect home prices to increase modestly in the next 12 months, with the median expected price increase at 3.4%4. The expected price change is modest compared to the strong price growth in 2012-2013. Local conditions vary, but concerns about how borrowers are finding it difficult to obtain a mortgage and weak job recovery appear to be underpinning the modest price expectation.
The map shows the median expected price change in the next 12 months by state of Realtor respondents in the May – July 2014 surveys. Respondents from Florida and Texas were the most upbeat. Tight inventory and the strong growth in Texas metro areas may account for the optimistic outlook. Expected price growth is more modest in other states.