Home Prices May Be Rising Too Much for First-Time, Mid-Market Buyers

The pace of home prices nationwide eased a bit in February, according to the latest update out today from the S&P/Case-Shiller index. But there are still troubling signs for a crucial segment of the housing market: first-time and mid-market buyers.

Prices in 20 major metropolitan areas were up 0.7 percent from January and 5.4 percent year-on-year. That’s slightly lower tan expected by most economists.
Portland, Seattle, and Denver reported the highest year-over-year gains among the 20 cities with another month of annual price increases.
”Home prices continue to rise twice as fast as inflation, but the pace is easing off in the most recent numbers,” says David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “The year-over-year figures for the 10-City and 20-City Composites both slowed, and 13 of the 20 cities saw slower year-over-year numbers compared to last month.”
While financing is not an issue for home buyers, rising prices are a concern in many parts of the country, he added.
“The visible supply of homes on the market is low at 4.8 months in the last report,” Blitzer said. “Homeowners looking to sell their house and trade up to a larger house or a more desirable location are concerned with finding that new house. Additionally, the pace of new single family home construction and sales has not completely recovered from the recession.”
Another troubling issue: the inventory of “entry-level and middle-tier homes” is down sharply, and “home prices in those segments are rising more quickly as demand stays strong and the economy keeps chugging along,” Zillow chief economist Dr. Svenja Gudell told BusinessInsider.
“Entry-level and mid-market buyers — typically the housing market’s bread and butter — are likely to face stiff competition, rapidly rising prices and very limited inventory,”Gudell said. The patience of many buyers will be tested in coming months.”

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