By: Gaurav Bhola, MSM, Managing EditorThe housing market has been in a downturn for a while now. The mortgage market is part-and-parcel of the housing market, has also been seeking a recovery. The reports on existing home buying sales for July and August shook the markets last week. Also, the decline in the consumer price index figured into Wall Street’s equation. However, the report for existing-home sales, the report’s median price component was stronger than PREDICTED.
A Buyers Market
The current home inventories are enhancing opportunities in the buyer’s market. The existing-home sales were 4.3% lower in August at 5.50 million unit annual pace from 5.75 million pace in July. The sales of single-family homes declined 3.8%, while sales of co-ops and condos fell 8%, maintaining infirmity in the housing market.
The current unsold home supply grew to 10 months from 9.6 two months ago. In parallel, single-family home supply climbed to 9.8 months from 9.2 months, the premier level since May 1989. Also, the median price came down to $224,500 from a revised $228,700 in July.
However, the decline in existing-home sales in August was less than expected compared to the 12.2% dive in THE pending-home sales index in July. This was a good surprise given the deterioration in the real estate market and homebuilder confidence in recent months.
Buyers Look for Opportunities
The housing, mortgage, and real estate market have been tough in recent months for home sellers, not for home buyers. While some home buyers have decided to stay on the sidelines for the time being, many are looking for bargains. The home buyers will eventually help reinvigorate demand for mortgages such as, fixed rate mortgages, adjustable rate mortgages, 100 percent financing loans, subprime mortgages, conforming loans, interest- only mortgages, and second mortgages.
The mortgage conundrum can be revitalized as the general public and real estate investors start buying homes and condos. This is already happening, as many real estate investors are starting to buy condos and use them to generate immense rental income. The mortgage industry will benefit from the increase in real estate property purchase for use as rental income generation, as investors and buyers will need mortgage financing. Also, if interest rates continue to drop as they did last month, many homeowners will perform mortgage refinance.
In the past, investors looked to flip houses but now they are looking to buy and hold for the long-term until they see home prices rebound. This turnaround to traditional real estate investing philosophy will mean that the housing market for the near future will not see unrealistic price appreciation of the last few years; which locked out many middle class and working families from owning their dream home.
Now, the tide is turning the other way, working families may now be able to afford a home. The housing market still has not bottomed out, but it will very soon. This is certainly not good news for home sellers yet, but as home prices deflate to realistic affordable norms, buyers will throng at the opportunity to buy a home. This new found home buying spree will certainly help resuscitate the mortgage markets, including mortgage brokers and mortgage lenders’ business.
