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 sales.

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 purchasers.

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.