U.S. Home Sales Weaken Despite Lower Rates

Mortgage interest rates are falling, but that is not encouraging more Americans to buy houses, especially in higher-priced urban markets.

According to Freddie Mac, 30-year mortgage interest rates fell to 3.78%, remaining near the lowest levels seen in the first half of 2013. Fifteen-year mortgages also fell on a week-over-week basis to 3.06, a fall of 1.3% from the prior week and 8.5% from a year ago. Thirty-year mortgages have fallen 12.5% from a year ago.

Mortgage interest rates are falling, but that is not encouraging more Americans to buy houses, especially in higher-priced urban markets.

According to Freddie Mac, 30-year mortgage interest rates fell to 3.78%, remaining near the lowest levels seen in the first half of 2013. Fifteen-year mortgages also fell on a week-over-week basis to 3.06, a fall of 1.3% from the prior week and 8.5% from a year ago. Thirty-year mortgages have fallen 12.5% from a year ago.

The fall in rates combined with better weather in the first quarter has not translated into widespread sales gains. Home sales for the last 30 days are up only 2.73% for the last four weeks, according to DataQuick, a real estate research firm. That is a lower rate of year-over-year growth than in the last quarter of 2014.

The fall in sales growth indicates growing weakness in real estate that has also caused housing starts to decline. According to the Census Bureau, single-family unit housing starts fell 6.2% on a month-over-month basis in February in a trend that most economists failed to predict.

Bay Area Falls

San Francisco has seen the weakest demand for real estate since the financial crisis, with sales in the last month falling to their lowest point since February 2008.

Home sales in the San Francisco region have fallen considerably, according to DataQuick, as the most expensive urban area in the country continues to price out more Americans. February sales fell to 4,376 new and existing units in the nine counties of the Bay Area, a fall of 1.1% on a month-over-month rate and an extreme decline of 10.9% from a year ago.

In addition to falling sales, prices have also declined on a month-over-month basis, to a median sales price of $565,000. That is still 4.6% higher than the same period a year ago. The bay area has seen year-over-year increases for 35 months in a row, according to DataQuick.

DataQuick analyst Andrew LePage says February’s numbers are “odd,” but concedes that tight credit remains a challenge for many potential homebuyers. “That said, it is easy to see that supply is still constrained. It is also clear the mortgage market remains off-kilter. Home loans are readily available for those who have good credit, a W-2 income and who are applying for a government-backed mortgage. But it can still be challenging for others, such as the self-employed and retired, even for those with a high income or significant assets, or both,” he said.

While there are less homeowners buying property, growth from investor buyers remains strong in the region. Absentee buyers, who are mostly investors, accounted for 24.8% of all homes sold in the region, up 1 percentage point from a year ago.