One such reason is that many homeowners lack motivation to move up. The recession is over but the economy remains weak and consumers’ wages and incomes have stagnated, notes Robert Moline, president and chief operating officer of HomeServices of America, a real estate brokerage based in Minneapolis.
Last year’s run-up in house prices dramatically reduced affordability, he says. Interest rates are higher and inventories are tight in some places.
Potential buyers are “sitting in a home with a 3.25% mortgage. They would like to move up. But their new mortgage is going to be at 5%” and the monthly payments will be more expensive, Moline said at real estate conference in Washington on Monday.
Meanwhile, consumers are worried about the unrest they see around the world.
“They are scared,” Moline said. “So what is going to drive them to take the risk and purchase a house? No one is talking about that.”
Howard Hanna, the chief financial officer of Howard Hanna Real Estate Services, a real estate brokerage based in Pittsburgh with a mortgage banking subsidiary, agreed that some people are afraid.
Cash sales used to make up 8% to 10% of all home sales, he noted. In 2013, the figure shot up to 28% and in the first quarter of this year cash sales topped 30%, he told attendees at the Real Estate Services Providers Council Conference in Washington.
“Where did this cash come from? I think people are afraid” and are pulling money out of the stock market, Hanna said.
Still, the broader implications for housing are discouraging. People have changed since the recession, Hanna said. More are renting than buying homes. Empty nesters used to buy a more expensive house. “Now they have been buying down,” he said.
Moline is concerned 2014 will be a “bumpy” year. “We need to be watching very carefully what happens and come up with strategies to help these people move up,” he said.