Donna Cicerone and her husband Paul want to put their three-bedroom home in Milton, Massachusetts, on the market. First, they have to find a house to buy.
The Cicerones live in the Boston area, where all but three weekends this year have had snow, sleet or rain. Bad weather has forced them to cancel house-hunting plans half a dozen times, they said. When they have found a house they liked amid a limited supply of properties, they’ve been outbid.
“The moment we sign a contract to buy, we’re putting our house on the market,” said Donna Cicerone. “We feel like we’re missing an opportunity because everyone says there are lots of buyers, but there’s nothing we can do.”
Frustrated shoppers and would-be sellers like the Cicerones are setting the pace for the housing market’s spring selling season, the March through June period when more than half of U.S. home sales take place. The market’s getting a late start this year because so much of the country has been in the grips of bad weather, said Dean Maki, chief U.S. economist for Barclays PLC in New York.
“There aren’t many people who want to drive around looking for homes in a blizzard, and there aren’t many sellers who can put their homes on the market unless they have some place to move to,” Maki said. “We’ve seen sales take a hit so far, lagging where they usually are, but we think the next few months will make up for it.”
Home sales declined in February to the lowest level since mid-2012, according to the National Association of Realtors. The number of contracts signed with the intention of purchasing properties fell that month to the lowest since 2011, according to the Realtors’ group. While the numbers are seasonally adjusted, they can be influenced by unexpected events such as unusual weather.
Applications for mortgages to purchase homes dropped in February to the lowest since 1995, according to an index from the Mortgage Bankers Association that also is seasonally adjusted. By mid-March, the gauge regained about 12 percent from that low, while remaining about 17 percent below the level it was during the same week in 2013.
Most of the sales blocked by bad weather will happen in the next few months, Maki said. Housing forecasters Fannie Mae and the Mortgage Bankers Association predict 2014 home sales will be
“Because we’ve had a late start to sales, we expect a bit of an exaggerated seasonal bounce,” said Maki.
Sales of existing homes probably will rise to 5.14 million in 2014, up from last year’s 5.07 million, according to the mortgage bankers group. Mortgage lending for purchases probably will total $661 billion, near last year’s $652 billion, the trade group said.
Like many buyers, the Cicerones are eager to purchase a house so they can lock a mortgage rate before borrowing costs rise. The average U.S. rate for a 30-year fixed mortgage was 4.4 percent last week. A year earlier, it was 3.57 percent. By the end of 2014, the average rate probably will be about 4.6 percent, said Fannie Mae.
“We’re ready to pounce when we find the right house,” said Cicerone, 48. “We want to put our home on the market to catch all the buyers nervous about mortgage rates, and we want to find a house as fast as we can so we can lock in a good rate too.” They may get some cooperation from the weather in April. Below-normal temperatures will give way to more seasonal weather in the eastern U.S. next week, according to Matt Rogers, president of Commodity Weather Group LLC in Bethesda, Maryland. The December through February period was the coldest in four years.
Borrowing costs have risen as the Federal Reserve continues tapering stimulus efforts that have kept interest rates low. Policy makers cut monthly bond purchases to $55 billion this month, from $85 billion last year. Fed Chair Janet Yellen said the program could end this fall and that the benchmark interest rate, which has been close to zero since 2008, may rise six months after that.
Tighter lending also is hurting the market, said Michael Hanson, a former Federal Reserve economist now working for Bank of America Corp. in New York. In January, the Fed issued a report showing 1.4 percent of banks had raised mortgage standards, the first increase since April 2012.
“We need more first-time buyers in the market so they can purchase the homes of people who want to move up,” Hanson said. “We won’t see a normal real estate market until they are included, and they are the ones most affected when lenders tighten standards.”
First-time buyers accounted for 28 percent of all purchases in February, up from 26 percent in January that was the lowest in data going back to October 2008, according to the National Association of Realtors.
The supply of homes for sale is bigger than last year, according to the National Association of Realtors. At the current sales pace, it would take 5.2 months to sell the properties on the market in February, compared with 4.6 months a year earlier.
The markets in certain areas, such as Boston, Denver, and Houston, are leaner than during the 2013 Spring selling season. In Boston and Boulder, Colorado, the number of homes for sale in February was down about 30 percent from a year ago, according to Zillow Inc. in Seattle. In Houston, Dallas and Denver, the contraction is about 20 percent. The metropolitan New York and Seattle areas were up 1 percent.
That has made extra work for home-loan brokers such as Jonathan Sexton, a vice president at NE Moves Mortgage LLC’s office in Cambridge, Massachusetts. Each time people make an offer on a house, their mortgage broker prepares a letter showing they are pre-qualified for the amount of the bid. When supply shortages cause bidding wars, those letters are in greater demand.
“So far this year, I’ve seen an inordinately low success rate for bids because the supply of properties is so limited,” he said. “I wish I got paid in pre-approval letters instead of closed loans.”
Sales in the Boston area and other parts of the country likely will pick up speed as the market goes into April and May, said Bank of America’s Hanson. “The housing market, like the rest of the economy, is on a gradual recovery path,” said Hanson. “In the next months, we’re going to see the Spring market come to life.”