The housing market in the Western region of the country has slowed dramatically as a result of low inventory, tight credit and affordability.
In the West region, there is a shortage of inventory which is making it difficult for homebuyers to find the right home. Interestingly, this shortage is continuing to put upward pressure on prices. When we talk to potential buyers we are finding most are on the fence about selling. We have clients who want to want to wait and see if prices go up further, there are the underwater homeowners who are hoping the prices go up enough to avoid having to do a short sale and then the ones who want to move to a new house but can’t find the right one.
The continuation of the restrictive lending standards has sidelined many potential buyers. According to the National Association of Realtors, qualified first-time buyers and single buyers are having a difficult time obtaining a mortgage due to tight credit standards. Despite a recovering housing market, the NAR notes that lenders still favor dual-income households that are more likely to have higher credit scores. In 2010, single buyers accounted for 32 percent of the market share. That percentage declined to 25 percent in 2012 and 2013.
Home prices are up from a year ago and combined with higher mortgage rates affordability suffers. “Affordability has fallen to a five-year low, as home price increases easily outpaced income growth,” Lawrence Yun, chief economist for the National Association of REALTORS(r), noted in a recent housing report. “Expected rising mortgage interest rates will further lower affordability in upcoming months.”
The combination of low inventory, tight credit and lower affordability has combined to slow our local Sacramento real estate market. With holidays upon us, I don’t see this improving until we move into the New Year.
