Potential buyers attend a for-sale open house in Alexandria, Virginia.
Jonathan Ernst | Reuters
According to Tracy Kasper, president of the National Association of Realtors, the real estate market is grappling with several “delicate” dynamics.
“What we’ve seen over the last probably 12 to 18 months is what I really like to call a leveling off,” Kasper said Thursday during CNBC’s Financial Advisor Summit.
This slowdown in home sales is due to “exponential year-over-year increases” during the Covid-19 pandemic, Kasper said.
With fewer people selling their homes, there is now an “inventory crisis,” she said.
“We have experienced a crisis – our first home buyers are struggling,” she added.
The concerns of first-time buyers
During the Covid-19 pandemic, it has been difficult for first-time home buyers to compete with other buyers who have more money to spare, Kasper said.
Now they simply can’t find anything as current homeowners are hesitant to put their home on the market and forego an existing low-interest mortgage.
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Mortgage rates are currently approaching 8%, their highest in decades, and have priced many first-time homebuyers out of the market, Kasper said.
Higher interest rates increase monthly payments, which can make it more difficult to qualify for a mortgage. Lenders rejected loan applications due to “insufficient income” more frequently last year than at any other time since records began in 2018, according to a new report from the Consumer Financial Protection Bureau.
“In most cases, income has not increased at the same pace as average mortgage payments,” certified financial planner Barry Glassman, founder and president of Glassman Wealth Services in McLean, Virginia, recently told CNBC.
Glassman is also a member of CNBC’s Financial Advisor Council.
Given these obstacles, Kasper says real estate insiders are desperately looking for ways to increase inventory, including pushing for government incentives like tax breaks for sellers.
“We are looking for any conversations we can have to open up this inventory,” Kasper said.
Housing and banking groups also sent a letter to the Federal Reserve this month urging the central bank not to consider further interest rate hikes.