This year's April residential property sales were a little disappointing. Real estate sales typically climb during the spring as the weather gets warmer. Springtime and summertime sales are typically higher because kids are not in school during this time, so it is the best time for families with children to move to a different school district. Springtime property sales have not met expectations this year, however. Here are some possible reasons for this.
Already Bought a Home during the Past Year
Residential real estate sales were enhanced by last spring's first time homebuyer tax credit while it was available. Some of the people who bought homes last spring because of the tax credit would likely have been looking for homes this spring if the tax credit had not been offered. A lot of people who were contemplating buying a new house soon escalated their plans to be able to claim the government's tax credit for first time homebuyers.
A Lot of People Can't Afford to Sell Their Houses
Diminishing residential property prices have put many property owners in a bind. They are unable to sell their houses, so they are stuck in their houses. They owe more on their mortgage loans than their houses are worth, so they would be required to come up with the difference between the balance of the home mortgage and the sale price of the house in order to be able to sell the house. Since they are unable to sell their houses, they can't buy a new home, no matter how much they might want to.
It Is Very Difficult to Get Approved for a Home Loan Today
The mortgage industry is to blame for a big portion of the downturn in the number of home sales. Not only have mortgage lenders tightened their lending requirements in the aftermath of the foreclosure crisis, but they seem to have gone too far. These days, you are not very likely to get a mortgage loan at all unless you have superb credit. You may also have to provide a big down payment.
One customer planned to get a mortgage loan to purchase a $2 million home, but he wasn't able to get the home mortgage approved before the closing, so he ended up paying cash for the house. It is pretty bad if somebody who has two million dollars in the bank is unable to get approved for a home mortgage.
Appraisals that Come in Too Low
In a survey, the National Association of Realtors found that a significant number of its real estate agents had experienced problems with low appraisals. Fourteen percent of the real estate agents surveyed reported that the seller decided to lower the price after receiving a low appraisal, while 11% reported that they had a contract canceled because of a low appraisal. Appraisals for less than the negotiated purchase price can cause financing to fall through because most lenders won't lend more than the home is worth.
Thirty-one Percent of Home Sales Are Cash Purchases
31% of all housing sales in April were cash sales. That fact helps explain the reason why the only segments of the real estate market that grew were the very low end and high end homes. Sales of houses under $100,000 and above $500,000 increased while everything in between went down. This is due to the fact that the majority of cash real estate purchases are made by investors, who typically buy foreclosure properties, and wealthy individuals who have enough cash lying around that they really don't need mortgages.
With this variety of factors still affecting the economy, it's not too surprising that real estate sales are still lagging behind expectations and hopes for the economic recovery.
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