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Existing home sales rise as investors swoop
A sign sits in the front yard of a home being offered for sale in Pleasant Prairie, Wis.
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Kai Ryssdal: Now to the little sector that helped bring the world's biggest economy to its knees. That'd be housing, of course. The typical spring buying season hasn't been all that typical so far this year, but there was a glimmer of improvement today. Sales of existing homes rose more than expected in March. Demand for the mortgages to buy those homes got a boost as well -- up about 10 percent -- the highest mark this year for mortgage demand.
So is the housing market finally working its way out of the woods? Maybe. Here's Marketplace's Stacey Vanek Smith.
Stacey Vanek Smith: Home sales out today show the housing market is improving -- in a slow and steady kind of way. Kenneth Rosen chairs the Fisher Center for Real Estate at U.C. Berkeley.
Kenneth Rosen: They're getting slightly better, but not as strong as they could be given how favorable market conditions are for buying.
What he means is low interest rates and depressed home prices. What's holding the market back? Rosen says there's a lot of anxiety from buyers that prices will keep falling. And even people who are ready to get the plunge might not qualify for a mortgage loan.
Rosen: There's a lot of people who would like to buy a house, but credit is so tight today, they can't.
Last month, more than a third of home sales were all-cash deals, which is a sign that investors, not families, are taking advantage of the low prices. Still, Denver realtor Jon Larrance says he's starting to see traditional buyers reappear.
Jon Larrance: In the last couple months, we've seen a lot of activity. A lot more buyers are ready to look now. In fact, in the last week, we've seen a huge number of contracts.
Larrance says the problem now is sellers -- the glut of foreclosed homes on the market is pushing prices down.
Software developer Chris Allen and his wife have been house-shopping in Albany, N.Y., for more than a year. He says finding a mid-range home is almost impossible.
Chris Allen: From $200,000 and below and $600,000 and above, there's plenty of homes out there. It's really the middle is what I'm seeing as a drought, almost like a donut. There's a lot of stuff on the outer rings, but nothing in the middle.
Allen has been pre-approved for a mortgage, and he's poised to pounce.
Allen: There is a time when you just break down and just say, the next house I see, I'm buying it.
In New York, I'm Stacey Vanek Smith for Marketplace.
I find both the NAR data and in particular the Case Schiller indexes misleading about the overall real estate market. Here in the midwest, agricultural land and rural home prices continue rising, and over the long term, our prices never went up a lot but neither did it go down. The same is true for lakefront property across the upper midwest which always has a finite supply. As to locally owned banks, they rarely gave out a home loan without the old standards of 20% down and a clear ability to pay for a mortgage. The results? Consistent slow steady rise in home and land values other than a flat spot in 2008, foreclosures are almost non existent and the housing "crisis" is something we hear about in the rest of the country.
Cash purchases last month were NOT just investors. Last month we closed on our new house in Columbus and were forced to pay cash. I just retired, but my pension payments had not yet started, and my wife's income (her job is the reason we momved from Philly to COlumbus) did not meet the lender's bogey for income to debt ratio ... despite our being able to show assets that were 8 TIMES the amount of the mortgage we were applying for!! (Thanks to financial reform legislation which I support, it's ALL about the monthly cash flow). Other baby boomer retirees beware!
