Spring Homebuying Season Starts Up Outside Polar Vortex

Sales agents at Main Street Realtors in Long Beach, Calif., didn't enjoy the usual postholiday downtime. But they aren't complaining.

"On January 2 the phones started ringing again," said Geoff McIntosh, managing broker and co-owner of the agency in the Pacific Coastal city south of Los Angeles.

And they've kept on ringing.

"We continue to see an extremely active marketplace," he said. "We've had a lot of pent-up demand and incredibly short inventory.

What's called the spring homebuying season, typically the busiest of the year, is now under way — if not yet in full swing everywhere in the U.S. It typically lasts from February through the end of May, though spring doesn't officially begin till March.

But in many markets — especially those untouched by polar-vortex woes — it's just as strong as last year's sizzling selling season, when ultralow mortgage rates had yet to creep up much.

"We seem to have the same number of buyers," McIntosh said. "We just don't have enough inventory to sell to them.

Activity is brisk in many markets around the U.S., including several in California, Florida and even freezing New York City.

"Last year was very strong, almost historic," said Steve James, president of the Manhattan Brokerage division of Douglas Elliman Real Estate. "Looking at the first couple of months of signed contracts this year, we're basically almost parallel to last year.

Even with expected new development this year in New York, "prices will continue to go up because of the low inventory," he said.

While inventory remains tight in many markets, helping lift prices if not the number of sales, it's seen improving as sellers decide to list as buyers adjust to higher rates, but before rates go up too much.

"Fear of higher interest rates is motivating people to buy now," said Andrew Barbar, a broker with Keller Williams Realty Services in Boca Raton, Fla., and president-elect of Florida Realtors.

Mortgage rates are expected to hit 5% or more by the end of the year. That's still low by historical standards, but well above the 3.4% early last year.

Total housing inventory in the U.S. at the end of January rose 2.2% to 1.90 million homes, representing a still-tight 4.9-months supply at the current sales pace, said the National Association of Realtors. A supply of 6 to 6.5 months represents a balanced market.

January's Pending Homes Sales Index for the U.S., a forward-looking indicator based on contract signings, comes out Friday. It fell 8.7% in December from November, due in part to abnormal weather, and was 8.8% below the year-earlier period.

Getting a jump on Friday's pending home sales report, the California Association of Realtors said Wednesday that its pending home sales index vaulted 22.9% in January from December, based on signed contracts. That reversed a two-month decline. Pending sales in California were still down 17.5% from the previous January, but the CAR noted that statewide housing inventory was slowly improving as more sellers listed their homes.

"We're starting to see a turning point in the market as we approach the spring homebuying season," stated CAR President Kevin Brown.

Frigid temperatures in recent months in parts of the U.S. have been tied to the polar vortex weather system. But warm-weather markets can't blame the polar vortex for housing woes. South Florida's busiest housing season starts earlier than most, in January, when visitors flock to the area during the so-called "high season" from January to March. Many check out properties while they're there.

"We're in a sellers market. If it's priced right, it will get multiple offers," Barbar said of the South Florida market now.

January closings in the tri-county region from Miami-Dade to Palm Beach counties were up 20% over January 2013, Barbar says.

"We're expecting February to show continued strength in demand," he said.

There are fewer investors in the market as prices have gone up, meaning less competition for buyers who intend to live in their homes full-time or part-time.

Florida's statewide new listings for single-family homes rose 13.8% in January vs. a year ago and were up 7.4% for townhomes/condos.

Unusually severe winter weather across other parts of the country likely impacted home sales into February, especially where driving is essential.

NAR chief economist Lawrence Yun commented last week that "some housing activity will be delayed until spring" because of "disruptive and prolonged weather patterns across the country.

Purchase applications for loans for the week ending Feb. 21 fell 4% from the week prior on an adjusted basis to the lowest level since 1995, the Mortgage Bankers Association reported this week.

"This is the time of year we would expect a significant pickup in purchase activity, and we are not yet seeing it," stated Mike Fratantoni, MBA's chief economist.

Construction and sales bounce back at least partially in the month after bad weather ends, says Jed Kolko, chief economist with real estate web site Trulia (TRLA).

"But with this harsh February weather so far, that bounceback might not come until March," he said in a recent email.

He noted that the polar vortex hit hardest in regions with less housing activity, the Northeast and Midwest. The South and West account for 76% of new-home starts and 64% of existing home sales, he said.

January new-home sales jumped 9.6% from December, the government said Wednesday. It was the fastest pace since July 2008. At month's end, an estimated 184,000 new homes were for sale, a supply of 4.7 months, down from 5 months at the end of December.

Homebuilder Lennar (LEN), which builds in many warm-weather markets such as California and Florida, said in its quarterly report early this month that it expects a strong spring selling season.

The spring homebuying season still faces challenges. Luxury builder Toll Bros. (TOL), skewed to markets hit hard by winter storms, reported a 6% drop in orders in its first quarter ending Jan. 31 and trimmed the top end of its 2014 delivery forecast.

Construction of new homes, a much smaller portion of the overall housing market, is still far below normal levels.

Tight credit, limited inventory, and higher prices and mortgage rates "will hinder home sales activity until the positive factors of job growth and new supply from higher housing starts begin to make an impact," Yun said in an NAR report.