From the NYT:
Spring failed to inspire a surge in home sales nationally this year, even though mortgage rates are still reasonably low. Although economists insist that the housing market is on an upward trend, abnormal conditions left over from the recession continue to be a drag.
Mortgage applications for home purchases as of June were down 15 percent from the same period last year, according to the Mortgage Bankers Association. And sales of existing homes were about 6 percent weaker this spring compared with 2013, the association said. (In May alone, sales were down 5 percent from the previous year, the National Association of Realtors reported on Monday.) So what is holding buyers back? At least three major dynamics are at work.
MISSING SUPPLY OF HOMES Many markets are undersupplied with the homes buyers are looking for. One reason is that homeowners who refinanced when interest rates were very low now have little incentive to sell, as they would almost certainly have to buy at higher rates. According to Mark Fleming, the chief economist for CoreLogic, a real estate information service, almost half of all mortgaged homeowners obtained financing at rates of less than 4.5 percent.
UNEMPLOYED YOUNG ADULTS The engine of recovery is dependent upon young people forming new households, but they are still struggling, said Jed Kolko, the chief economist for Trulia, a real estate website, and another conference speaker.
Joblessness among adults 25 to 34 was among the highest of all age groups during the recession. From 2009 to 2012, the employment rate for young adults dipped as low as 73 percent, compared with 81 percent in 2001, Mr. Kolko said. It is currently at about 75 percent.
INVESTORS DRIVING UP PRICES In some areas like Las Vegas and Phoenix, first-time buyers are in competition with institutional investors, who are buying up cheaper homes by the hundreds to turn into rental properties. Last year, strong investor demand helped drive a rise in home prices that was significantly ahead of household income growth, according to a recent report by Mark Palim, a vice president in the economic and strategic research group at Fannie Mae.
But investor activity appears to have peaked, which means the market will shift to what Mr. Kolko describes as “a slower but more sustainable recovery.”