Home sales continued to be sluggish in February, and decreasing affordability is holding back would-be buyers, according to Redfin (www.redfin.com), the technology-powered real estate brokerage. Slow sales have been largely attributed to low inventory for months, but many markets have now seen inventory rise while sales continue to fall. Several markets along the West Coast have seen sharp increases in inventory, yet home sales in the West fell 13.4 percent year over year, hitting their lowest point in five years in the first two months of 2014, while prices rose 19.1 percent year over year. Across 19 markets nationwide, prices rose 13 percent over last year, while home sales dropped by 10.3 percent.
“It’s likely that many people are doing a double-take when they calculate mortgage payments on homes they are considering buying. Home sales in the coming months will be a test of buyers’ tolerance when it comes to changing affordability, particularly for first-timers,” said Redfin economist Ellen Haberle.
West Coast Sales Hit Lowest Point in Five Years
- In Redfin’s West Coast markets, sales fell 13.4% from February 2013, and hit a five-year low in the first two months of 2014. Sales fell most dramatically in Las Vegas (-22.7%), Sacramento (-21.8%) and Ventura (-20.8%). Across 19 markets, sales fell 10.3%, with markets east of the Rockies taking a less dramatic hit and a few even seeing modest increases.
- Home prices were up 13% year over year, with the largest gains seen in West Coast markets such as Las Vegas (25%), Sacramento (22.2%) and Riverside, Calif. (21.7%).
- Inventory of homes for sale overall fell 5.6% from last year, but picked up notably in several West Coast markets, including Phoenix (38.5%), Sacramento (23.9%) and Riverside, Calif. (22.8%).
Homebuyers Hesitate in February; Lower Home Sales Expected in March
- The number of customers requesting tours in Redfin’s markets grew just 1.9% from January, compared with a 6% increase during the same period last year.
- Offers picked up 17.8% month over month, compared with a 20% increase last year.
- This year’s sluggish demand is likely a result of both the scarcity of homes for sale and dramatic increases in home prices from last year. Redfin analysts expect demand to pick up over the next two months as more inventory comes on the market.
Here are some tips for buyers and sellers from Redfin agents across the country:
- Start searching early. “Many first-time home buyers couldn’t compete in the bidding wars of 2013,” says Redfin agent Marcus Fleming, Phoenix. “My advice to first-timers and experienced buyers alike is to start searching early to get an idea of what you can realistically afford and to be patient with the inventory as more homeowners start listing their homes.”
- In hot markets, stay calm. “As proof that all real estate is local, the Atlanta market feels frantic right now, with inventory still extremely low and Redfin clients’ demand for tours and offers both up 47% from last year,” says Redfin agent Danielle Coats, Atlanta. “I’m advising my clients to take a step back before making an aggressive offer on any home that hits the market as it’s easy to get caught up in bidding wars. Inventory will eventually beget even more inventory, as many people who have one to sell are waiting for something to buy first.”
- Sell your current home first to make your offer more competitive. “I’m recommending that buyers currently in a home sell first and then buy, even if it means living in temporary housing for a few months,” says Redfin agent Sandy Rosen, Boston. “Neighborhoods with great schools are incredibly competitive and I’m finding that it often takes waiving the mortgage contingency to win a bidding war here. Having the cash from your home sale makes waiving this contingency a lot less risky for buyers who are able to do it.”
- Price it right. “This time last year, sellers could name their price and still get 20 to 30 offers,” says Redfin agent Eric Tan, Los Angeles. “This year, even homes that are priced competitively are only seeing two to three offers come in, often at or below list price. Pricing appropriately is crucial.”
- Make it move-in ready. “It’s critical that sellers take the extra steps to make their homes more appealing to buyers right now,” says Redfin agent Sondra Savino, Chicago. “Do the repairs, make the bed perfect before listing photos are taken and get creative by writing a personal letter to buyers who tour the home describing improvements you’ve made and explaining what you love most about the home.”
- Keep mortgage rates in mind. “This is the calm before the storm,” says Redfin agent Lynn Ikle, Baltimore. “Several of my home-selling clients have been waiting to have listing photos taken until the snow melts and their grass is greener. I’m encouraging them not to wait until the garden is in full bloom because right now buyers are anxious about getting under contract before mortgage rates rise too much more. Once rates hit the 5% mark, I expect demand to fall off significantly.”
For more information and advice on what buyers and sellers should consider as the real estate season heats up, please visit www.redfin.com and reach out to a Redfin agent in your city.
About the Real-Time Home Price Tracker
Redfin’s monthly report on home prices, inventory levels and sales volume is an up-to-date, accurate portrait of the U.S. real estate market, published before other market reports. As a broker with access to dozens of Multiple Listing Services (MLSs) used by real estate agents to list properties and record sales, Redfin gets data within minutes of a sale, pending sale or listing activation, well before any government, media or analytics organization. Full data may be downloaded in a spreadsheet.
About the Real-Time Demand Pulse
The Redfin Real-Time Demand Pulse is a monthly analysis of thousands of customers touring homes and signing offers across the United States. Redfin is the only major real estate broker storing data in one location about its agent tours and offers, enabling the company to project sales volume for the U.S. without waiting 30 to 45 days for sales to close, or an additional 15 to 30 days for them to be recorded as public record.
Connect with Redfin
Redfin (www.redfin.com) is a technology-powered real estate broker that represents people buying and selling homes. Founded and run by technologists, Redfin has a team of experienced, full-service real estate agents who are advocates, not salespeople, earning customer-satisfaction bonuses, not commissions. Redfin.com features all the broker-listed homes for sale, as well as for-sale-by-owner properties that don't pay brokers a commission. Redfin also offers online tools that make the entire process of buying or selling a home easier and more fun. The company serves 23 U.S. markets and has closed more than $13 billion in home sales. In 2012, Redfin was named one of The DIGITAL 100: World's Most Valuable Private Tech Companies by Business Insider.
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Rachel Musiker, 206-588-6863