Homes Without Equity, Here We Go Again

John Burns Real Estate Consulting has released some unhealthy statistics regarding new home purchases from January through mid-October,2009. 59% of sales have been dependent upon government financing programs such as FHA, VA and USDA that allow purchases to be financed at 96.5%-100% loan LTV (loan to value). The highest use of FHA financing was in Northern California (68%), while southern Florida builders reported the highest percentage of cash purchases - a good thing(22%).

Two hundred and sixty-two home building industry executives from public and private companies responding to the survey also provided the following statistics, as of early October.

Average net sales per community dropped from 17% nationally, returning to levels last seen this past June and July. While homes were overall much more affordable with low conventional mortgage rates and the federal tax credit continuing to support new home sales,home builders still reported declines in traffic and sales rates in September and early October, seasonally adjusted.

In addition, major banks reinforced by pronouncements from the US Treasury are reporting that foreclosures are expected to bounce upwards again in 2010. As some markets are already 2/3 dominated by foreclosures and short sales, this is not good news for the home building industry.

Extending and/or expanding the home purchase credit due to expire November 30th may bring another stream of buyers back to the market, but if they have questionable budgeting habits and are likely to default, is this really a solution?

With recession unemployment hitting record numbers, the ability to make payments on a home, whatever the initial credit and promotional discounts, will be problematic for many.

Current economic conditions and the continued lack of buying within one’s means remain front and center to the home industry problems. Eventually, this situation becomes everyone’s “problem”.

Subscribe by RSS Subscribe by Email