The 3 Things that Could Hold Housing Back in 2014

by Peter Thomas Ricci

The housing market has made considerable strides in the last few years, but what could hold it back from a true recovery?

There are many uncertainties in this world, but here’s something we can be fairly sure of: the housing market of 2014 bares little resemblance to the graveyards of years past. Not only has the market share of distressed sales dropped nearly 30 percentage points, but also, as we recently detailed, delinquencies have fallen by nearly 50 percent and nearly four million mortgage-holders have escaped negative equity.

The housing bubble years, though, left us with a number of lingering ailments, and it will be very beneficial to keep those things in mind when gauging the future of housing. Here are three things, in particular, that you should keep on your radar:

1. All-Cash Sales – According to NAR’s latest existing-home sales report, 32 percent of home sales in April were all-cash, which is nearly identical to the 33 percent of March and perfectly identical to the 32 percent of April 2013. Don’t get us wrong – it’s great that people are buying houses, regardless of what financing options they choose. The problem, which we reported on earlier, is that housing right now is very much dominated by upper-class consumers, which make up a relatively small chunk of the consumer base; so, as long as all-cash sales remain elevated, we can glean that everyday Americans remain absent in housing.

2. First Timers MIA – We’ve devoted quite a bit of ink to first-time homebuyers, and for good reason. At 29 percent of homebuyers in April (according to that same NAR report), they remain at least 11 percentage points below their historic levels. Thus, just like elevated all-cash sales are a red flag for housing, depressed levels of first-time homebuyers are also a sign, and it would behoove any agent to closely monitor such stats.

3. Downpayment Blues – It’s no mystery that lending standards remain quite tight in today’s housing market, but the following stat, courtesy of Vox.com, still surprises – from 2009 to 2014, the percentage of first-time homebuyers with downpayments of 6 percent or less fell from 77 percent of first timers to 61 percent today. Translation: Far less first-time homebuyers nowadays can get away with lower downpayments, given how regularly banks demand 20 percent down.

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