Dan Green
Dan Green
Filed Under
Real Estate Sales

“Move-Up” Home Buyers Gain Market Share; Signal Strong Housing Foundation

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Existing Home Supply May 2012 Rising To 6.6 Months

Even as mortgage rates make new lows nationwide, the pace at which homes are selling is slowing. 

Existing Home Sales Slip 2% In May 2012

According to data from the National Association of REALTORS®, Existing Home Sales fell 2 percent in May from the month prior.

An "existing home" is a home that's been previously owned or occupied.

There were 4.55 million units last month on a seasonally-adjusted annualized basis. This marks the second-lowest reading of the year -- second only to March -- but total sales remains well north of the rolling 12-month average and more than 10% higher than the totals from May of last year.

In addition, despite a drop in the national inventory of homes listed for sale, NAR reports "home supply" moving higher by 0.1 months to 6.6 months nationwide. Home supply is the amount of time it would take to sell all homes for sale given the current pace at which buyers are buying.

We can infer from the data that there are fewer active home buyers today than there were earlier this year.

In isolation, a statistic like this sounds bearish on housing. However, a deeper look at the numbers reveals that a strong foundation is being built for the long-term health of the housing market.

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Fewer Investors And First-Timers; More Move-Up Buyers 

The May Existing Home Sales report showed that today's home buyers are increasingly of the "move-up" variety; buyers who have owned a home and are moving to a new one. 

The percentage of real estate investors and first-time home buyers, by contrast, shrunk :

  • First-Time Buyers : 34% of all home buyers, down 1 percent from April
  • Real Estate Investors : 17% of all home buyers, down 3 percent from April
  • Move-Up Buyers : 49% of all home buyers, up 4 percent from April

Move-up buyers are a key statistic because nearly all of them had to sell a prior home before purchasing a new one. One year ago, move-up buyers were frozen -- unable to sell and unable to buy.

Today, that's not the case.

Super-low mortgage rates and loosening mortgage standards are giving move-up buyers an edge. It's one reason why markets such as San Francisco, California and Phoenix, Arizona are performing so well -- pent-up demand can be a powerful force.

Furthermore, move-up buyers tend to purchase "bigger" homes; homes at higher price points. This helps to explain why median sales prices are rising in so many U.S. markets. Move-up buyers are buying homes at higher price points because, finally, they can.

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The Housing Market Bottom Is Behind Us

Many U.S. markets have clearly demonstrated that they're in recovery -- not a complete recovery, but absolutely underway. The rest of the United States will soon show the same.

If you're planning to buy a home in late-2012 or 2013, consider moving up your time frame, if possible. Not only will home prices be higher in the future, but so will mortgage rates. It's a double-whammy that can change your household budget. The housing market will continue its slow, steady recovery. Get ahead of the curve.

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About the Author

Dan Green is a mortgage market expert, providing over 10 years of direct-to-consumer advice. NMLS #1019791. You can also connect with Dan on Twitter and on Google+.

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