In multiple areas nationwide the residential real estate market remains soft and offers home buyers splendid opportunities. Prices are coming down and many sellers are at last realizing that the marketplace determines the listing price and not them. They are now more willing to negotiate rather than just turn down unappealing offers. And mortgage interest rates in recent weeks have reached new lows, hovering right around 5.5%. These developments should be boosting transaction activity, but are they making as big a difference as expected?
The word affordability plays a large role in that. The Center for Housing Policy conducted a study on the very issue and according to its findings things are getting a bit better. Some noteworthy advances have been made in the expensive areas like California, Arizona and Florida, which also happen to be the states where prices rose really fast during the boom years. They are also three of the four leading mortgage foreclosures states, with Nevada being the fourth. So it makes market sense that prices are now receding in them and helping out with the affordability assessment.
Despite the marginal improvement, the working families are the ones who still face a shortage of homes they can manage to get a mortgage for. Workers like registered nurses, retail sales persons and customer service representatives - all deemed high-growth occupations - are simply priced out in many regions. In the Center for Housing Policy's report registered nurses, for instance, can't afford a median-priced house in 108 out of the 201 markets the study looked at. And customer service reps were left out in 185 markets.
Las Vegas mirrors pretty much the national trend. Prices soared a few years ago to unprecedented highs and are now retreating, narrowing the affordability gap that grew way out of control. Stagnant home sales in the valley will improve as soon as median household incomes and home prices come closer together, reaching a comfortable and workable balance. Bulk of the adjustment has to come from the price sector because wages predictably increase at a slow pace. There already are small single-family houses on the market for under $200,000, indicating that the affordability issue is getting corrected here.