More real estate professionals have high hopes for residential sales in the coming months, as the job market improves, 30-year mortgage rates continue to stay at about 4 percent, and inventories of homes for sale widen in many markets.
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Practitioners have an optimistic six-month outlook, with the latest REALTORS® Confidence Index rising to 60. A reading above 50 indicates that more RELATORS® view conditions as “strong” rather than “weak.” The index, which reflects responses from more than 1,800 REALTORS® about their transactions in November, shows that the strongest outlook for the single-family home market was in North Dakota.
First-time home buyers appear to be slowly coming off the sidelines, as their share of the market rose to 31 percent in November from 28 percent a year ago.
However, REALTORS® continue to report some persistent challenges, mostly citing financing struggles that are still making it difficult for their buyers to qualify for a mortgage (although they do say conditions have slightly improved).
“The increase in mortgage insurance premium payments for FHA-insured loans continued to be reported as an added financial strain for first-time buyers,” the report notes. “Obtaining FHA financing for condominiums (typically the entry points for home ownership) continued as a major issue; many condominiums were reported as not meeting FHA eligibility requirements.”
Expectations about the general market for condos and townhomes remained weak, except in markets such as the District of Columbia, North Dakota, Colorado, Texas, and Florida, according to the survey.
Another hurdle still facing the market is the lack of “affordable” and “good” houses on the market, REALTORS® noted in the survey. Inventories are rising in many markets, but the available housing options are falling short of buyers’ expectations in many cases.
Home prices are still rising, with about 53 percent of REALTORS® reporting that the price of their “average home transaction” was higher in November compared to a year ago. The increase in home prices is slowing, however. The median home price of an existing home in October was $208,300.
REALTORS® generally are optimistic that home prices will continue to modestly increase in the next 12 months, with the median increase expected to be about 3 percent. States that are the most upbeat about price expectations include California, Nevada, Oregon, Washington, Wyoming, Colorado, North Dakota, Texas, Michigan, Florida, Georgia, Tennessee, Massachusetts, Rhode Island, and the District of Columbia. These states have strong job growth and are attracting Millennials and retiring baby boomers, according to the NAR report.
Source: “REALTORS® Confidence Index Survey: Report on the November 2014 Survey,” National Association of REALTORS® (2014) and “REALTORS®’ Outlook Upbeat for Next 6 Months,” National Association of REALTORS® Economists’ Outlook Blog (Dec. 30, 2014)