The most recent housing market data seems to support the position that renters should stay renters. While the sale of foreclosures has continued to drop, pending sales and rates overall have remained flat. Still, the overall growth has improved since 2014, in small but measurable increments. But what could be holding back a significant increase in movement within the housing industry itself?
“While demand and sales continue to be stronger than earlier this year, Realtors have reported since the spring that available listings in affordable price ranges remain elusive for some buyers trying to reach the housing market and are likely holding back sales from being more robust,” stated Lawrence Yun, chief economist of the National Association of Realtors (NAR).
Affordable price ranges remain steady
Note the affordable price ranges are not necessarily improving or even remaining steady. Thus, for many potential home owners, home prices themselves are by default pricing these individuals right out of the housing market. This is especially true in areas where there is significantly higher demand, such as Seattle or areas within Texas.
The current volatility of stocks is making interest rates go up and down, as investors sell off and others jump in to grab what they see has bargain pricing for various stocks. The overall movement of the market with no clear direction is likely to keep interest rates down. For renters, this means more of the same. Home prices are increasing due to smaller inventories in many areas. Since the inventory does not meet the demand in several markets throughout the U.S., this is driving prices up.
Housing market transitioning is happening
However, there are signs of the housing market transitioning from the investor driven to the more traditional buyers. This is building a solid foundation for housing in the long run. Still there are potential bumps in the road. “That’s not to say there are no cracks in the foundation of this recovery, the top three of which are housing affordability—or lack thereof in some high-flying markets—along with overdependence on capricious cash buyers—both foreign and domestic—in some markets, and the persistent overhang of underwater homeowners who continue to represent heightened default risk given any future economic shockwaves,” stated Daren Blomquist, vice president of RealtyTrac.
A definite positive is that the number of home sales in foreclosure has continued to drop. This is particularly encouraging, because increased foreclosures were a significant part of the housing downturn of 2008. The prices for these foreclosures included significant drops in pricing, thus increasing cash sales. For mortgage lenders, the decrease in cash sales can be a big plus, because it means more buyers turning to the mortgage industry.
Does this mean that cash sales do not still play an important part in the movement of real estate? No, because cash sales are still evidence of purchases and movement within the housing industry. However, the affordability factor is still going to make it difficult for renters to make the move to homeownership. For renters who wish to move into homeownership, this market requires creativity to meet your housing needs without breaking the budget.