This year's peak home-buying season was lackluster, as buyers seeking to trade up to larger houses were absent, said the head of one of the country's largest real estate firms.
Jim Gillespie, president and chief executive of Coldwell Banker Real Estate LLC, in an interview with Reuters, said sales were only modest during the spring, with demand overwhelmingly dominated by first-time home buyers and investors.
The more important 'move-up' buyers were absent and that is not encouraging, said Gillespie, who is based in Parsippany, New Jersey.
Move-up buyers are those seeking to trade in their current home for a larger one, and Gillespie said that group is important for sustaining a healthy real estate market. Because of the sharp decline in housing prices and the collapse in consumer demand, homeowners are having difficulty selling their current homes to move up to pricier properties.
They are key to a U.S. housing market recovery, he said.
Gillespie said some of this lack of demand could be alleviated through more incentives. He recently met with U.S. Congressional leaders to discuss housing, and said he supports a bill currently in the Senate calling for a $15,000 tax credit for all buyers of primary residences, with no income limit, for a period of 12 months.
The current $8,000 tax credit, first passed in February as part of a $787 billion fiscal stimulus plan, is limited to first-time home buyers and expires at the end of November. The proposed plan would expand eligibility to all home buyers and increase the credit to $15,000.
The U.S. housing market is in the midst of its worst downturn since the Great Depression. Home prices have been falling since peaking in the second quarter of 2006, and the Obama Administration has tried various measures to restore that market through tax benefits and temporary halts to foreclosures.
Congress is focusing on the foreclosure problem, which is a good thing, but they need to focus more on the demand side, he said.
Gillespie said market realities have come to bear as well. As government bond yields rose, mortgage rates have naturally followed. The 30-year fixed-rate mortgage averaged 5.38 percent for the week ending June 18, according to a survey released on Thursday by home funding company Freddie Mac.
That was down from the previous week's 5.59 percent, which was the highest level since November, but up sharply from the record low of 4.78 percent set the week ending April 2.
Many people got spoiled by mortgage rates at 5 percent and below, he said.
When the mortgage rate rose above 5 percent, it spooked many buyers who were already hesitant, he said.