Here's probably the biggest reason prices are headed for a fall, even here in Greater Boston: Buyers just can't keep up.
Overall mortgage activity is on track to plunge 42 percent in 2014 from last year, hitting the lowest levels since 1997, the Mortgage Bankers Association reports.
The biggest hit is in refinancing - with so many homeowners having already taking advantage of lower rates, refinance activity will decline by more than 60 percent this year, the bankers group predicts.
Yet far more concerning is the falloff in mortgage purchase applications. The number of mortgages to buy homes is poised to decline by more than 9 percent in 2014, the MBA reports.
As a result, overall home sales will shrink by more than 4 percent by year end, the mortgage bankers predict.
That's the first decline in home sales four years, Bloomberg reports, noting how stagnant incomes and super tight lending standards are killing the housing recovery.
First-time buyers are struggling the most at this point - higher prices always take a higher toll on those just starting out.
Here's a quote from the Bloomberg piece that gets to the heart of the matter:
"The big housing rally wiped itself out because prices increased too quickly for buyers to keep up," said Richard Hastings, a consumer strategist at Global Hunter Securities LLC in Charlotte, North Carolina, who predicted the slowdown eight months ago. "The pool of eligible new buyers is collapsing" because of stagnant incomes and lack of credit, he said.This is no quick market squall, over in a few months, but rather a more momentous market shift.
In fact, home sales and mortgage activity will continue to falter right into 2015. Here's what the MBA's forecast says:
The weakness continues to be concentrate in the first-time homebuyer segment of the market, although the entire conforming portion of the market is contracting at this point.
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