The National Association of Realtors® (NAR)
said that Realtors are expressing less confidence about overall
market conditions, buyer and seller traffic, home prices and other issues
related to real estate. The REALTORS
Confidence Index (RCI) for July indicates that, even as home sales and prices
are improving Realtors see several factors constraining recovery.
The RCI is derived from a nationwide
survey of Realtors who are asked to measure market conditions in their area
both currently and as expected over the next six months as strong, moderate, or
weak and a number of other questions relating to home prices, traffic, and
market conditions. A score of 50 on each
index is the midway point between "strong" and "weak" conditions.
The RCI indices measuring market
conditions fell for all three property types, but performed best for
single-family homes which remained above 50 for both current conditions (54)
and future expectations (56.) Current
and six month outlook scores for townhouse properties were 35 and 38
respectively and for condos, 28.9 and 32.
According to survey respondents, among
the factors holding back a full housing recovery are tight mortgage standards,
stringent and slow bank approvals, low appraisal values, tight inventories relative
to demand which resulted in multiple bid situations in some cases. Contributing to the tight supply was the
reluctance by sellers to list at current depressed prices and banks holding
their owned real estate off market. At
the same time, there is a continued concern that a big release of shadow
inventory in the future could depress home prices.
Realtors report that prices are
continuing to firm up and that demand is increasing faster than supply in some
markets. Sixty-four percent of respondents
to the NAR survey reported seeing price increases of 10 percent or more. NAR says that this is consistent with its own
data on existing home sales which showed a median price increase from $180,300
in May to $189,400 in June. Eighty-five
percent of respondents expect constant or higher prices over the next year.
The indices measuring buyer and seller
traffic continue to indicate an imbalance between the two. Buyer traffic declined slightly to a score of
56, possibly because of tight lending and appraisal standards as well as the
continuing slow economy. Seller traffic
however has remained flat at 40 from near the beginning of the year.
Marketing time seems to be dropping
quickly. Thirty-three percent of
Realtors indicated that recently sold properties had been on the market for
less than a month, up from 30 percent in April; 59 percent were sold within
three months. The proportion reporting
properties on the market for six months or more fell to 21 percent from 30
percent one year earlier.
Twenty-four percent of survey respondents said they had
recently sold a distressed property, down from 31 percent in June 2011. Over a third (39 percent) of these sales were
cash transactions. Realtors reported an
average discount of 20 percent on foreclosed property and 15 percent on short
First-time buyers continue to constitute
a smaller share of the buyer market than has historically been noted. During July approximately 34 percent of Realtors
reported selling to a first-time buyer, up from 32 percent in June. Typically the market share is around 40
percent. NAR said this low share
reflects in part the difficulty in securing financing and the delay with distressed
sales. They also note that investors
with cash have crowded out first-time buyers who typically require
financing. Investors represented 16
percent of the market in July.
More than a third of buyers obtaining
purchase mortgages during July had down payments of 20 percent or more compared
to 35 percent in June. The percentage of
down payments of 11 to 19 percent rose from 4 to 6 percent of mortgaged
Appraisals continue to be a problem with
about a third of the respondents reporting issues within the previous three
months. Ten percent reported the problems
resulted in a contract cancellation, 10 percent reported a delay, and the
remainder that the appraisal problem led to a lower final price. Among the issues reported were appraisers failing
to keep up with the appreciation in market values, slow turn-around times, and
out of town appraisers lacking sufficient knowledge of local conditions.
One of the most frequent comments from
respondents related to what was called unreasonably tight credit
conditions. Respondents said lenders
are taking too long to approve applications, require excessive information from
borrowers, and seem to be focusing on making loans only to individuals with the
highest levels of credit scores.