Pending Home Sales Dip in August

October 3, 2014

You may have heard reports that pending home sales dropped nationwide in August, and are wondering if there’s any cause for concern. First of all, the report is based on the National Association of Realtors’ Pending Home Sales Index, which fell just one percentage point that month to end at 104.7. The dip is miniscule, and it is still an above-average level of contract activity. If anything, the important thing to evaluate is what caused that dip, and where will the market go from here.

Analysts believe that investors have begun to be less active in the housing market because there are fewer distressed homes at cheap prices. This evaluation has a ring of truth to it, especially considering the second quarter data from RealtyTrac that showed that in the second quarter, 42.5 percent of Hawaii home sales and 38 percent of nationwide home sales were paid for in cash. Investors represent the vast majority of those who are able to buy a home outright without needing a loan.

RealtyTrac’s nationwide data also revealed that 67 percent of homes priced at $100K or less were paid for in cash. Yes, investors buy up cheap properties. That leaves first-time home buyers and others who need a loan with fewer affordable homes to choose from. Now that there are fewer cheap properties available, traditional home buyers are expected to tow the line for the housing market moving forward.

First-time home buyers have made up less than a third of all home buyers over the past two years, but the job market is improving. While there are more jobs now, we’re still waiting for wage growth to pick up. The market should see an increase in the percentage of first-time home buyers making purchases as wage growth increases.

If you’re a traditional home buyer who will need a mortgage for an affordable Maui home, there is one way in particular that you can stay ahead of the investors. Keep in mind that they tend to move in a group, and that means delays in their reactions to changes in the market. A few of them might move quickly, but all you really need is to stay ahead of the bulk of them. If they continue to pull out of the housing market, keep an eye on housing prices. Watch very carefully for those new Maui home listings, instead of following the ones that have been on the market for a long time and are slowly dropping their asking price. There’s probably a reason those have been passed up. Watch for the new ones, and move quick when you find one that meets your needs. Even if you need a mortgage, the key is to make a reasonable offer that will be accepted before the investors show up to pay in cash. It’s all about vigilance.

If you need assistance buying Maui real estate, you’ll find our contact information at the bottom of the page. Mahalo!

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