Slight Improvement in Home Sales Primarily Due to Investor Activity

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The housing market marked increased activity in March 2014. The higher number of pending home sales was welcomed with skepticism, however, as the activity is slower compared to previous years. The increase in sales came primarily from the higher investor demand while the share of firs-time home buyers remains low.

The increase in the index of pending home sales from February to March 2014 was 3.4%. This was actually the first increase for the past nine months. The improvement was seen as a positive sign, but it was lower than what is traditionally expected for the peak house buying season in the spring. This is clearly illustrated by the fact that despite the increase, the index was still 7.9% below the level of March 2013.

The West saw the largest increase in sales of 5.7% on a monthly basis followed by the South with 5.6% increase. The smallest increase of 1.4% was achieved in the Northeast. In the Midwest, sales actually fell by 0.8%.

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The number of homes purchased by first-time home buyers forms a smaller share compared to the houses purchased by investors with the difference being approximately 5%. Investors purchased a third of all properties in March 2014, despite their more cautious activity in recent months. This trend may remain with the growing house prices and the lower home affordability. House prices rose by 11% from 2013 to 2014 and by 28% from 2012 to 2014. Interest rates increased by 1% on an annual basis from 2013 to 2014.

Despite the efforts of lenders to attract borrowers through lower credit score and down payment requirements, potential home buyers are still reluctant to make a move. This is evident from the downward trend in the number of mortgage applications despite occasional upward fluctuations. Potential home buyers remain deterred by the higher interest rates and higher housing prices.

Christian

Christian

Christian Calvin mortgage Christian is a contributing writer for Mortgage.info. He is a graduate from the University of Tennessee with a degree in Communications and a concentration in Broadcasting. Christian has served as vice-president for a privately-held company for more than 20 years. Additionally, he has also applied his writing and business knowledge to various websites with a focus on business and sports news . . . both of which are passions. Christian enjoys playing golf and spending time with his family and friends.

Contact: christian@mortgage.info
Christian

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