Existing-home sales are hitting a snag because of several constraints that the housing market is grappling with, according to the National Association of REALTORS®’ latest housing report. NAR officials note several challenges for the housing recovery:
- Less Affordability: “Affordability has fallen to a five-year low as home-price increases easily outpaced income growth,” says Lawrence Yun, NAR’s chief economist. “Expected rising mortgage interest rates will further lower affordability in upcoming months.” Interest rates for 30-year fixed-rate mortgages increased to 4.49 percent in September from 4.46 percent in August, according to Freddie Mac. Rates are at the highest level since July 2011. Just a year ago, 30-year rates averaged 3.47 percent.
- Government shutdown: The effects that the 16-day federal government shutdown had on the housing market will likely be revealed in next month’s housing report, NAR says. “Just one impact of the recent government shutdown — delays in tax transcripts needed for approval of mortgage loans — put a monkey wrench in the transaction process and could negatively impact sales closings in next month’s report,” says NAR 2013 President Gary Thomas.
- Rising flood insurance premiums: Higher flood insurance rates went into effect Oct. 1 and could impact future sales in flood zones, NAR reports. The Biggert-Waters Act gradually removes and reduces federal subsidies for flood insurance on more than a million homes nationwide. It has caused premiums for flood insurance to skyrocket in some areas. “REALTORS® report that approximately 10 percent of transactions in September were located in flood zones, and that nearly one out of 10 of those transactions were delayed or canceled due to concerns over rising insurance rates,” NAR’s report says.
Information to share: by Melissa Dittmann Tracey, NAR