Tuesday’s report on existing home sales last month highlights how tough the market is for buyers of lower-priced homes, especially in parts of the high-priced West.
March sales of previously owned homes fell to their slowest annual pace in 20 months, down 0.2% from February to 4.59 million, the National Association of Realtors reported. It was the third straight monthly decline.
Year over year, the sharpest drop-offs are at the low end of the housing market, continuing a trend visible for two years.
Sales of homes under $100,000 fell nearly 18% from March 2013 and those in the $100,000-$250,000 range fell about 10%. But sales of homes over $1 million rose almost 8%, according to supplemental data on the NAR website. The median existing-home price — half were below the median and half above — was $198,500.
The West is seeing the sharpest plunges in sales of lower-priced homes and has been for some time. Compared with a year earlier, March sales of under-$100,000 homes fell 45% in the West, 18% in the Midwest, 16% in the South and only 3% in the Northeast.
What’s behind this trend? Inventories at the lower end of the market are tighter than a couple of years ago as the number of bargain-priced foreclosures and other distressed properties for sale has dwindled. Many of those homes were snapped up by investors, who bid up prices, accelerating that segment’s rebound from the housing bust lows.
In January 2012, when investor home-buying was red-hot, homes under $100,000 held a 29% share of U.S. existing home sales, NAR data show. Last month, they were about 19%.
Over the same period, the share of home sales in the $250,000-$500,000 range has grown to 26.1% from 20.4%.
Investors’ influence on the market is waning, but demand from other buyers has not yet strengthened enough to replace it.
The reasons for that include tight lending standards for residential home buyers, higher mortgage rates than a year ago and higher home prices that make ownership less affordable, says economist Patrick Newport of IHS Global Insight.
Source: USA Today