In our Vero Beach Real Estate News for May 2015:
Pending Vero Beach Home Sales Up
Pending Vero Beach home sales were up in March, even though the low supply of available homes for sale is still a concern.
The National Association of Realtors said this week that its seasonally adjusted pending home sales index rose 1.1 percent to 108.6 last month. The index has climbed 11.1 percent over the past 12 months after having dipped in 2014.
Overall, figures suggest strengthening demand from would-be buyers, even though there are relatively few new listings on the market and sales prices are rising at a faster rate than wages.
NAR says new home construction needs to increase and more existing homes need to come to market. Traditional buyers continue to replace investors paying cash. The association says that indicates this year’s activity is being driven by more long-term homeowners.
Pending Vero Beach home sales are a barometer of future purchases. A one- to two-month lag usually exists between a contract and a completed sale, meaning that the gains should appear in April and May sales numbers.
With pending Vero Beach home sales up, greater buying activity has yet to bring more sellers into the market, with a mere 4.6 month supply of homes on the market. Economists consider a standard market to have at least a 6 month supply of homes for sale.
Right now, new homes are coming onto the market at about half of historic norms, creating a supply-and-demand mismatch that keeps younger households on the sidelines.
Building more new homes would help boost supply, but home construction has been weak. Developers are focused increasingly on building apartments and more expensive homes for wealthier buyers.
One factor pushing up prices is a steady decline in so-called "distressed" sales, which include foreclosures and short sales. Short sales occur when the seller owes more on a home mortgage than the house is worth. Both usually sell at steep discounts to traditional Vero Beach home sales.
Lowest Home Ownership Rate in 20+ Years
While Vero Beach home sales continue to rise, the home ownership rate in the U.S. has fallen below 64 percent for the first time in over 20 years.
The U.S. Census Bureau announced that the seasonally adjusted 63.8 percent rate in the first quarter of 2015 is far below the 69 percent rate just 10 years ago – a time when homebuying may have been the easiest for Americans.
As investors continue to buy single-family homes to feed rental demand, and first-time buyers remain unable to afford rising prices, U.S. homeownership is taking a big hit.
Rentership has increased dramatically since the financial crisis and Great Recession, and continues to do so as the economy improves and more young people move out of their parents' homes into rental apartments. Many of them straddle jobs while managing student loan debt or other expenses, finding it impossible or extremely challenging to come up with a down payment in the current seller's market.
With millions of properties still underwater — those homes worth less than owners owe for their mortgage — there is still a stigma attached to owning a home in the wake of the 2007-2008 housing market meltdown and foreclosure crisis.
However, longer-term trends seem to be pushing homeownership rates back to "normal" levels, according to Sam Khater, deputy chief economist at CoreLogic.
In the mid-1990s pro-homeownership policies led to an expansion in mortgage credit and the homeownership rate peaked in 2004 at 69 percent. Homeownership rates are back to roughly their long-term trend between the 1960s and 1990s.
Vero Beach Housing Market Could Face Problems
With pending Vero Beach home sales up and not a lot of new inventory coming on the market to help slow that down, and the home ownership rate now at it's lowest level in over 20 years, could there be trouble brewing in the housing industry?
The future of the Vero Beach housing market depends on jobs, and people earning enough to buy houses. But experts at a recent forum are predicting problems due to income levels. Until incomes improve across the board and hurdles to credit access are eased, it is expected that the Vero Beach housing market will continue to perform below capacity.
Some of the nation's top economists meeting at a forum at the National Association of REALTORS®' Washington, D.C., office last week all echoed the same sentiment.
Households could be trying to save more because of the "unique uncertainty" in people today. There's a general tendency now for people to want to save more, because they're afraid. They're afraid for their jobs. What do you do? You don't spend money lavishly; you try to accumulate some. But they don't succeed.
Economists at the forum said today's Vero Beach housing market represents just a partial recovery from the severe downturn that hit the country about seven years ago, but they differed on how much of a role overly tight credit is playing in the slow return to a full recovery.
The problem today doesn't seem to be a credit issue. It's more of a demand issue. Borrowers have less money now after millions went into foreclosure. We're facing a whole new ball game in the Vero Beach housing market, and it's anyone's guess if the lower income problem will be overcome soon enough to save the industry.