Existing home sales fell sharply to their lowest level in nine months in January, according to new data from the National Association of Realtors. Tight inventory is hurting sales and driving up prices which may further keep first-time buyers from getting into the market. And that's a trend that has hurt the recovery so far.
“There is a notable speed bump that the housing market hit in January,” said Lawrence Yun, NAR’s chief economist, labeling the start to the year as disappointing. Sales of existing homes account for nearly 90% of all purchases in the U.S. Sales are still 3.2% higher than a year ago, the NAR reports.
Two other housing reports will be out this week-- new home sales and the S&P/Case-Shiller 20-city home price index-- and will help firm up the housing picture. Economist Robert Shiller, Nobel prize winner and creator of the home price index that bears his name, told Yahoo Finance last week, this is the biggest housing slump we've ever seen.
Zillow CEO Spencer Rascoff, however, doesn't think things are so bad. "Home values came down about 30% from the peak, and they bounced back up to where we're around 9% below the peak so we've come way back from the bottom." But at the same time, things aren't necessarily coming up roses. 2015 will be a year of slower growth, says Rascoff. Zillow data shows that each of the last 9 months has had a slower rate of appreciation. In 2014, home values were up 5%. In 2015, Zillow predicts home values will appreciate 2-3% year-over-year.
Rascoff thinks a slower appreciation isn't always a bad thing. "We think housing is best when it's boring," he says. The market has also become very hyperlocal with real estate in the places like the Bay Area seeing prices increasing rapidly up about 20% last year. This year, Zillow expect prices to be up just 7% there.
The buying market is also wary of an uptick in mortgage rates, which surprises Rascoff because, "If you take the longview, all of these are incredibly low mortgage rates so you'd think that it wouldn't matter that much." Zillow has found that people tend to spend more time researching a car or vacation than getting a mortgage. "People obsess over whether they should bid $300,000 or $310,000 for a home but then they don't think about whether their mortgage is 3.5% or 3.7%."
Mortgage rates have a much larger monthly significance on a homebuyers out-of-pocket than the actual price of the home, says Rascoff.
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