This morning I read an article in the latest issue of REALTOR magazine, by Lawrence Yun, NAR's chief economist (and an economist for all who are in the industry) about why some buyers are still waiting to buy homes. Given that we are experiencing record-low mortgage rates nationally, it's crucial to understand why such conditions are not contributing to more home sales.
Mr. Yun's article cited three factors, and while most of us may be familiar with them, it's refreshing talk about them to understand the forces in the marketplace.
- The first factor that's deterring buyers is the availability of credit. Which varies across the nation, but is one of the main contributing factors that makes it difficult to qualify for loans.
- The second factor, and one that's very crucial in understanding any economic activity is market confidence. The perception amongst buyers is that prices will continue to decline, and that means, that buyers are creating conditions for future declines. Specifically, as buyers hold off on purchases, "their prophecy will become reality," inventories would grow further and "we'll seee downward pressure on prices."
- The third factor Mr Yun cited is the confidence in the overall economy. "Slow economic growth leads to economic insecurity, even among those who have jobs."
So what is the solution? Our chief economist argues that "once consumers regain confidence and banks increase lending to sound individuals, buying activity should start to pick up."
Common sense, right? It is, but the importance of these factors is crucial for any real estate professional to understand.
How soon will that happen? No one can say for sure, but based on other market news, the economy is beginning to take the steps to make that possible.
In the meantime, "high affordability and low mortgage rates will benefit those who are willing and able to purchase."
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