We have bantered about why sales have slowed down, and some are jumping on the affordability (or lack thereof) issue as a contributing factor:
LOS ANGELES (Dec. 17) – A run-up in home prices, coupled with higher interest rates, put downward pressure on housing affordability and led to the fourth straight month of sales declines in November, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) reported.
“Improving home prices are a double-edged sword for the housing market. While welcomed news for homeowners and prospective sellers, diminished affordability is squeezing out many buyers and dampening their enthusiasm for home purchasing,” said 2014 C.A.R. President Kevin Brown. “Buyers are playing the waiting game and putting their home search on hold until prices stabilize and more inventory becomes available in the market.”
When you dig into C.A.R.’s own research, there is this graph from the 2013 Realtor Survey taken early this year:
It appears that 50% of the potential buyers just need to find the right house. The motivated buyers won’t let higher prices and rates stop them; they will just be more critical about what they are buying.
Sellers will be smart to do more home tune-ups prior to listing, be sharper on list price, and pick a great realtor to help create a more attractive package for buyers. With higher prices and rates, they will want a better value now!