5 Market Problems Scaring REALTORS®
5 Market Problems Scaring REALTORS®
REALTOR® confidence in current and future market conditions took a slight dip in June as several challenges continued to pose a threat to their businesses and the housing recovery, according to the latest REALTORS® Confidence Index. In the survey of 50,000 real estate practitioners, the following problems were cited as the most common causes of loss of sales:
- Unrealistic buyers: "The market has slowed," the report notes. "In particular, buyers are reported as resistant to higher prices, are more demanding, extremely cautious, and looking for properties in perfect condition. In many cases, buyers are approaching sellers' markets as if they were buyers' markets, offering unrealistic and unobtainable prices." About 12 percent of REALTORS® surveyed who did not close a sale in June said that the buyer and seller could not agree on the price, and 10 percent reported that the buyer lost the bidding competition. REALTORS® say they believe greater buyer/seller education is key to improving buyer expectations.
- Limited inventories: Tight supplies of for-sale homes relative to demand is also a persistent problem haunting the market, providing buyers with fewer options, REALTORS® reported. Inventory is showing signs of improvement (particularly in states like California, Florida, Ohio, Hawaii, and Utah), but supply remains tight, the report notes. "Given the demand-supply imbalance, home prices generally continued to increase, and properties were on the market for fewer days for the sixth straight month," the report states. REALTORS® reported that properties averaged 44 days on the market in June, compared to 47 days in May. Home prices are also rising. About 68 percent of REALTORS® surveyed said that the price of their "average home transaction" is higher today than it was a year ago.
- Appraisals: "Appraisals have again shown up as a major issue," the report notes. "In particular, there was concern that current appraisals do not reflect changing and improving market conditions. Appraised values were reported as coming in too low. In addition, there was major concern in some cases about the lack of knowledge of local conditions by the appraisers." Appraisal issues were reported as accounting for 4 percent of failures to close a sale.
- Tight credit standards: About 15 percent of REALTORS® reported having clients who could not obtain financing, the survey showed. REALTORS® noted that even the most creditworthy borrowers faced a challenging credit environment. Many REALTORS® reported that the underwriting and income verification process in applying for a mortgage had become "too long." Also, "the recent price recovery amid the slow pace of income and job growth has made it more difficult for some buyers to access mortgage financing."
- Regulatory problems: REALTORS® report that Federal Housing Administration and Veterans Affairs loans also are leading to a loss in closings. REALTORS® reported that flood insurance is hindering deals, too. "Even though premium increases have been to some degree ameliorated, the reclassification of flood plains has been a problem and, in some cases, is seen as inaccurate or inappropriate," the survey states. Additionally, REALTORS® mentioned that the debt ratios outlined in Dodd Frank are too stringent for a growing number of clients and are "preventing sales from going through for creditworthy clients."
Source: REALTORS® Confidence Index Survey (June 2014)