U.S. existing homes sales increased 3.7 percent in March, according to a new report from the National Association of Realtors. The increase was largely attributed to cash purchases and buys made by investors. First-time homebuyers, on the other hand, steered clear.
First Timers Not Ready to Buy
As the housing market looks for any sign up improvement, it received good news on Wednesday with the report that sales of existing homes increased last month to a seasonally-adjusted annual rate of 5.1 million, up from 4.92 million in February.
The largest contributors to increased existing sales were foreclosures and short sales, which represented 40 percent of all sales. Deals paid for entirely in cash accounted for 35 percent of all sales.
First-time homebuyers were not as enthusiastic about getting out and buying homes last month. As a result, sales among this group dropped to 33 percent. Experts say purchases made by first timers are crucial to jumpstarting a successful housing recovery. But so far, the still-shaky market and uncertainty in employment is encouraging them to stay away.
Will Homebuyers Eventually Purchase More Houses?
Though sales were up in March, the pace for the month is far below the 6 million homes a year economists say is required to have a healthy housing market.
Unfortunately, it’s assumed that numbers will remain low until prospective homebuyers feel some level of confidence in their ability to purchase a home without it dropping underwater and maintain its payments over a 30-year term without losing their jobs.
New home construction hit a six-month high on Tuesday, which revealed that home builders feel confident enough in their ability to sell homes that they would risk building them.
But if investors are the main contributors to home sales and not individuals interested in keeping their homes for many years then, for now at least, it’s probably true that most prospective homebuyers are not ready to take on a mortgage loan yet. Unfortunately, this means the outlook on a market recovery remains grim.