3 Reasons Spring Weather Won’t Heat Up Home Sales

Just when the spring home-selling season should be revving up, it seems stuck in neutral

Mar 15, 2014 at 1:00PM

Source: Flickr / Robert S. Donovan.

March is here, and you might think that the recovering housing market will soar this spring, as a brighter economy and still-attractive mortgage rates converge to lift the sector to new heights. Even with the 2013 foreclosure rate falling to the lowest in five years , and home prices beginning to rise, however, the spring season looks more poised to fizzle than sizzle.

Why is the market in such a funk? Some analysts blame the severe winter weather, though housing starts in the Northeast jumped by a seasonally adjusted 62%. It seems that there are multiple issues at work here, which can be lumped into three major categories – the first of which impacts affordability.

Rising home prices and interest rates
While the increase in housing prices is a positive indicator for a healing market, the fact is that higher sticker prices mean fewer buyers lining up. And, though 30-year mortgage rates remain historically low, an increase from 4% to 5% translates into a $60 rise in the monthly payment on a $100,000 loan.

Add in the effects of new "qualified mortgage" rules that put more emphasis on the borrower's ability to repay the loan, and many prospective buyers have doubtless found themselves priced right out of the market.

Demand and inventory are low
According to online real estate brokerage Redfin, demand for houses has plummeted for the first six weeks of this year, with only an 8% increase in signed offers year over year, compared with a jump of 51% last year.

Some of this problem is likely due to the lack of homes for sale – inventory is at its lowest in four years. This issue is being compounded by a sort of Catch-22: sellers won't list until they find something to buy, which, in turn, is constraining the supply of available houses on the market.

Underwater borrowers are stuck in a rut
Rising house prices lifted another 4 million homeowners out of negative equity last year, but nearly 10 million still owe more on their mortgages than their homes are worth. This means that, even when they want to move, these homeowners cannot realistically sell at a loss. This scenario has the effect of keeping both houses and buyers out of the market.

This interactive map by Zillow makes clear just how prevalent this problem continues to be, six years after the financial crisis. For those who bought closer to the peak of housing prices, just breaking even might be an unattainable dream.

For these reasons, this year's house-selling season will likely be a disappointment to both buyers, and sellers. Sadder still is the fact that, for the very same reasons, next year is apt to look much the same.

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4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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