The real estate market is still in a deep sleep, by many accounts. Yes, it's true that there are pockets across the land where severely-reduced home prices are attracting brave buyers and well-heeled investors to venture out to make purchase offers. That is encouraging and Las Vegas happens to be one of them. Overall, though, a solid turnaround appears to be at least a few more months away.
A January study by the National Association of Home Builders, or NAHB, tells us that the main reason prospective buyers shy away from the marketplace today is because they can't sell their existing homes. 91% of them said so. Borrowers who acquired a house during the last four years or so probably are unable to sell because they are upside down on it. That's understandable, but what proportion of the market does that represent? 20% perhaps, or it could be a little more. Or then less.
Those, the vast majority of homeowners, who bought before the bubble years have in most cases at least some equity to lean on and could possibly sell if they wanted to. They, however, choose not to. One of the key explanations seems to be that they find it difficult to qualify for a new mortgage. Underwriting guidelines are much stricter now and down payment requirements higher, for starters. Also, since values have dropped steeply, they feel they are better off waiting a few years and build as much of the lost equity back up as possible. That, though, may require a long wait as the marketplace is struggling to regain its form.
Secondly, 88% said that grave concerns about the economy and employment prevent them from buying. Although it goes against the survey numbers, this could in fact be the main reason. Many are deciding to play it safe for now and that has to be respected. 75% felt that prices will come down even further. Well, that's a tough one to predict. And 68% believe that mortgage financing is hard to secure. This category might actually play a bigger role than being fourth in importance, as was argued above.
When the economy again shows some signs of well-charted direction, as it now seems to be getting, many of the fence-sitters will undoubtedly be ready to return to the marketplace.