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March 4, 2019
This year's spring home-buying season, when the frenzy typically kicks off for the year, appears to be off to a slow start—particularly in and around some of the nation's most expensive, coastal cities.
That's because for the fifth month in a row, the number of homes on the market surged 6 percent in February compared with the same time the year before, according to Realtor.com ‘s recent inventory report. Until last year, the nation had seen several years of housing shortages.
"It suggests that the housing market is starting on a cooler footing this spring than last spring," says Realtor.com's Chief Economist, Danielle Hale. That's partly a result of the long-term housing shortage that pushed prices up so high, fewer people were able to actually buy a home. "Sales have slowed. ... Affordability is a challenge."
The big, pricey, tech-fueled cities on the West Coast saw the greatest influx of homes on the market. The nation's most expensive market, Silicon Valley's San Jose, CA, experienced a 125 percent jump in the metro area in February compared with a year earlier. (Note: The metropolitan area includes the main city and the surrounding suburbs.) The median home price in the metro is a whopping $1,079,800—and that's down 10 percent from the previous year!
That sky-high price tag is one of several reasons buyers suddenly have more choices in Silicon Valley—if they have the means.
"Prices are so high there that even with a high-paying job, it's difficult to afford homes," says Hale. Therefore, residences are taking a little longer to sell.
"Builders are definitely trying to build in that area. Buyers are being a bit more hesitant [to purchase properties], while existing residents who are thinking about downsizing or retiring or moving somewhere else think now is a good time to put their home on the market, while home prices are still high."
Overall, the most selection is on the high end. The number of homes priced at $750,000 and above shot up 11 percent year over year in February.
That's because cheaper properties are most in demand, so they sell fast. And there simply aren't as many buyers with large-enough bank accounts to snap up the pricey homes.
(Source: Realtor.com | Clare Trapasso)
It's almost as if consumers didn't believe interest rates would stay low, but so far this year they have. Now, finally, consumers are responding.
Mortgage application volume increased 5.3 percent last week from the previous week and was 0.4 percent higher than a year ago, the Mortgage Bankers Association said in its seasonally adjusted index that accounted for the President's Day holiday.
"Mortgage rates were little changed last week, but as we anticipated, homebuyers are responding favorably to this more stable rate environment," said Mike Fratantoni, MBA Senior Vice President and Chief Economist.
With the spring buying season just getting started, house hunters may be reacting to lower rates, even as prices are still historically high.
Mortgage applications to purchase a home rose 6 percent for the week and were 3 percent higher annually. Purchase demand is still running well below historical norms, however, as today's buyers are facing the weakest affordability levels in a decade. Home prices are still rising faster than incomes, and first-time buyers are having trouble saving for down payments due to high levels of student loan debt and high rents.
Applications to refinance a home loan increased 5 percent from the previous week and were 3 percent lower annually. Refinance volume cratered last year, so the annual comparisons are becoming smaller, simply because refinance volume has essentially flat lined at this low level. Volume did hit the highest level in a month because jumbo loan borrowers tend to be more responsive to lower rates and banks compete hard for their business, reducing rates.
"Therefore, it was not surprising to see the average rate for a 30-year fixed jumbo loan drop to its lowest level since January 2018," Fratantoni said.
Mortgage rates were largely unaffected by Tuesday's testimony from Federal Reserve Chairman Jerome Powell before Congress.
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