Home values increased in JuneDate posted: 8/25/14 09:15:00 AM
The nation's home values are trending upward at all ends of the spectrum, according to a recent analysis from Redfin.
The average price of available homes for sale among the lower tier climbed 15 percent in June compared to the same month a year prior. Home values also increased 13 percent in the middle and 9 percent for the upper-echelon properties, according to Redfin's analysis of the nation's larger metro areas.
But Hui Shan, a housing analyst with Goldman Sachs, told Bloomberg the rising prices - especially at the lower end - aren't good for prospective homebuyers.
"If you see prices increasing for reasons other than fundamentals, it's not good for affordability," Shan said. "A lot of it has to do with investors coming into the market and buying properties. Those are not related to local residents' incomes going up."
Limited selections on the lower end
Sharlene Hensrud, a Realtor in Minnesota, told Bloomberg that many first-time and entry-level buyers have had to alter their expectations of what type of home they could land within a specific price range.
Hensrud said most of the cheaper homes in her area have been picked over by investors. She gave a recent tour as an example. Hensrud took two people to visit homes listed for around $140,000. She said they were disappointed to learn all they could afford in that price range was a one-bedroom, one-bath house with no garage. A few years ago, that price range would have delivered a three-bedroom property, according to the Realtor.
Tough times for new buyers
Lawrence Yun, chief economist for the National Association of Realtors, understands their plight.
Citing a Redfin analysis, Yun spoke about the decreasing number of available homes for entry-level buyers. The analysis stated the number of available homes for sale priced at $198,000 or less - the bottom third of the nation's housing market - fell 17 percent in June from the same month a year ago. Meanwhile, supply increased 15 percent for high-priced homes and 3 percent for homes in the middle.
"It's bad news for people looking for a starter home that all the choices are disappearing," Yun told Bloomberg. "People shouldn't expect inventory to show up on the low end. It's not available."
It's somewhat of a surprising statistic because the nation's overall inventory level went up in June, according to NAR. Available homes for sale went up 6.5 percent year over year to 2.3 million in June. In January 2013, only 1.8 million homes were available for sale, which was a 13-year low.
"There is inventory coming on line, albeit slowly," Nela Richardson, chief economist for Redfin, told Bloomberg. "The problem is it's not equally distributed. There is more turnover at the higher end. At the more affordable end of the spectrum, people are stuck."
But Bloomberg reported a growing number of affordable properties have been bought by all-cash buyers, who are then converting the properties into rentals. Another factor limiting the supply of affordable homes is debt. Many homeowners - especially those in starter or entry-level homes - are still underwater on their mortgages, which makes it tough for those sellers to list their property.
NAR reported first-time purchasers made up just 28 percent of all sales of previously owned homes in June. Historically, that number is about 40 percent.
David Crowe, chief economist for the National Association of Homebuilders, told Bloomberg that only 16 percent of new-home purchases were made by first-time buyers in May, the lowest in 15 years of data.
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