WASHINGTON (AP) -- Entering the 2014 spring buying season, the U.S. housing market faces an unusual dilemma: Too few people are selling homes. Yet too few buyers can afford the homes that are for sale.
"Both sides of the equation are in a funk," said Glenn Kelman, CEO of the real estate brokerage Redfin.
A 13.4 percent jump in the average price of a home sold last year, according to the Standard & Poor's/Case-Shiller 20-city index, hasn't managed to coax more homeowners to sell. And combined with higher mortgage rates, higher prices have made homes costlier for first-time buyers as well as for all-cash investors.
Average prices nationally are expected to rise by single digits this year. The gains could be strongest in areas with solid job growth, such as Seattle and Austin, Texas. And while construction will put more homes on the market, lack of affordability could keep sales flat to falling.
On the other hand, many lenders are easing the barriers for those with less-than-sterling credit. For these people, qualifying for a mortgage could become a little easier.
All of which leaves real estate, much like the rest of the economy, still trudging back to health nearly a half-decade after the recession ended. After last year's growth spurt, the housing recovery may have begun an awkward adolescence, one prone to fits and starts that can defy predictions.
Here are five vital signs that will shape home sales this spring and the rest of the year:
WHERE ARE THE SELLERS?
Good question. It's slim pickings for a lot of would-be buyers. That brutal winter we just got through prevented many East Coasters from listing their homes in recent months. About five months' worth of homes are on the market, compared with 5.9 months in 2012 and 8.3 months in 2011.
Housing supply previously dipped toward the 5-month level during the height of the boom in 2006, when buyers snapped up homes faster than they could be added. This time, fewer homes are being listed because 19 percent of owners are underwater on their mortgages - meaning the sales price wouldn't be enough to repay their loan.
Still, warmer weather, job growth and a strengthening economy are expected to encourage more listings this spring.
"We're all trying to figure out where the sellers are," said Redfin CEO Kelman. "Everyone seems to be waiting until April or May or June."
About 60 percent of Redfin buyers faced bidding wars in February, down from 73 percent at this time last year.
When few sellers emerged last year, prices for the limited number of homes available surged. Would-be buyers, facing a shortage of homes and locked in competition with one another, raised their offers.
Prices climbed in locales such as San Francisco, where a ton of money is chasing few properties and there's not enough construction. Bay Area homes have surged 23 percent, on average, the past 12 months, according to the S&P Case-Shiller index. That was faster than any other major metro area except Las Vegas, where much of the housing stock was rebounding from the depths of the recession.
This problem usually corrects itself. Higher prices should lure more sellers into the market who see an opportunity to cash out. That would then then lead to more listings and ease the face-offs among buyers. Sales data suggest that this has happened in Los Angeles, where more homes have been put up for sale, and they're staying on the market longer.
But around the country, many homeowners are still reluctant to sell because they would likely lose money on the deal. The 2007 housing bust still haunts the market.
About 19 percent of homeowners owe more on their mortgages than their properties would sell for, according to the online real estate database Zillow. An additional 37 percent are "effectively underwater": Their sale profit would be too low to cover the cost of listing their home and putting a down payment on a new property.
Still, each mortgage payment repairs some of the damage and improves a homeowner's equity. As home values grow further, more people will start to put their homes up for sale, and the supply should rise.
FIRST-TIME BUYERS NOT BACK (YET)
After the Great Recession officially ended in mid-2009, many economists predicted that pent-up demand for homes would drive sales in the years to come. Not exactly. Nearly five years into the recovery, buying remains subpar.
Sales of existing homes are projected to total 5 million this year, according to the National Association of Realtors. That's about 100,000 fewer than last year and far below the 5.5 million associated with healthy markets.
Much of that shortfall can be summed up simply: Too few first-time buyers. They bought about 1.5 million homes last year, about 500,000 fewer on average than they would have typically.
Last year's price increases makes affordability a growing obstacle for first-timers, said Jed Kolko, chief economist for the online real estate firm Trulia. Unlike current owners whose down payments come from selling a previous home, first-timers must amass a down payment. And higher home prices require more cash up front.
The situation is slowly improving for the 25- to 34-year-olds who would buy homes. About 738,000 of them found jobs in the past year. With more disposable income, more of them will move out on their own. Homebuilders have already ramped up apartment construction in anticipation of younger renters. That's a critical first-step before they eventually buy a house or condo.
"I don't think it will have a big impact on home ownership right away," Kolko said, "because it will take some time for young adults to save and build a credit history to buy a home."
CREDIT STANDARDS ARE LOOSER
You might have thought the economic meltdown would have shut off home loans to people with middling-to-weak credit. Yet something close to subprime borrowing has just started a comeback.
Wells Fargo is now offering mortgages to subprime borrowers with credit scores as low as 600, down from 640. (The median credit score for 30-year fixed mortgages had been around 730.) And non-bank lenders such as Carrington Mortgage Services are moving into that territory. Carrington has dropped its minimum credit score to 550. It's a sign that lenders are becoming less tight-fisted after restricting credit in the wake of the financial crisis.
Lenders are accepting borrowers they once rejected in part because they're hungry for more business after mortgage refinancing plunged in the past year as interest rates rose. The average 30-year fixed mortgage rate has risen about a percentage point to 4.4 percent from near-historic lows in May. A subprime borrower with a credit score of 550 would pay 7.15 percent, according to Carrington's rate sheet.
Investors bought roughly one in every five homes sold last year, according to the National Association of Realtors. Most of them made all-cash offers and ignited bidding wars that other would-be homeowners lost. The investors' properties became rehab projects or rentals.
But the 2013 price jump should cause investors to play a lesser role this year. Areas that suffered the most during the recession's housing bust, like Phoenix, Las Vegas and Tampa, have seen prices rise. They're no longer the bargains that investors considered them to be a year ago, said Zillow's chief economist Stan Humphries. The result is that bidding wars won't likely be as fierce in 2014.
Not all investors are disappearing. They're pursuing areas where homes can most easily be converted into rentals and deliver higher returns. Home prices in Cincinnati, for example, rose an average 2 percent last year, but rental prices jumped 10 percent. Similar trends can be seen in the Midwest.
HIGHER-END HOMES ARE HOTTER INVESTMENTS
It's better to be on the luxury side of the real estate market for the moment. Prices generally rise faster than at the lower end. And buying activity has increased in the past year.
Sales of homes worth more than $1 million rose 14.4 percent over the past 12 months, according to Bank of America Merrill Lynch. By contrast, sales of properties valued at less than $100,000 dropped 18 percent. A key reason: Fewer foreclosed homes are being listed.
Prices for more expensive homes have also risen much faster, according to Zillow. The online real estate firm divided the U.S. housing stock into thirds based on price. Homes now worth $305,700 or more - the top one-third of the market- rose in value annually at a 3.38 percent average during the past 18 years. Those prices grew 20 percent faster than did the bottom two-thirds of the market.
"Essentially, it's a tale of two markets," said Zillow's Humphries. "Your experience as a top-tier homeowner was substantially different than for a bottom-tier owner."