Residential Real Estate News
Inability to Sell Existing Homes and Concerns About Employment and Economy Keeping Buyers Out of the Market
(News Source: National Association of Home Builders)
Las Vegas, NV -- Prospective home buyers are staying out of the market primarily because they cannot sell their existing homes and because of concerns about employment and the economy, according to a recent survey conducted by the National Association of Home Builders (NAHB).
Additionally, 75 percent of the builders surveyed said that buyers believe home prices will drop further, and 68 percent said that buyers think it is hard to get financing.
"These results make it clear that Congress must include significant housing measures in any economic stimulus legislation that it enacts," Crowe added. "Traditionally, housing leads the economy into recession and is the first sector to recover. Until we can stop the freefall in home values and get home buyers back into the market, the economy will stay mired in recession. It is also important that Congress act swiftly because more than a third of the builders (34 percent) reported that buyers are staying out of the market because they think that interest rates will drop in response to government action."
Fix Housing First, a coalition of more than 600 housing-related groups headed by NAHB, is urging Congress to enact several measures that will achieve this goal. They include an expanded home buyer tax credit that does not have to be repaid, mortgage rate buydowns to as low as 2.99 percent for homes purchased in 2009, and enhanced foreclosure prevention measures that will keep families in their homes and prevent additional inventory from flooding the market.
"Builders reported that current home sales are down dramatically in every price range compared to a year ago, but indicated that the declines are most pronounced in the upper ranges," Crowe said.
Sales of homes priced under $150,000 have dropped 27 percent, and sales of homes in the $150,000 to $249,999 range are down 34 percent. However, builders reported that sales of homes priced $250,000 to $499,999 dropped 57 percent and sales in the $500,000 to $999,999 range dropped by 64 percent. Sales of homes costing $1 million or more were down 56 percent.
"Declines of this magnitude in every price range point up the necessity for Congress to act quickly and decisively," Crowe added.
He also noted that about 7 in 10 builders cut their prices in the fourth quarter of 2008, and six in 10 made no profit as a result. A significant number of those who reported that they didn't make a profit in the fourth quarter, 38 percent, reported that they were selling homes below cost.
Although the survey results reflected declining sales and a great deal of pessimism about the market, they also indicate that builders are adapting to the realities of the market. Eighty-nine percent of the builders surveyed said they are building lower priced homes, and 88 percent said they are building smaller homes, a trend that has accelerated since May of 2008, Crowe noted.
"Like professionals in any industry, home builders are taking stock of market conditions and adjusting their products accordingly," he said. "This shift is largely because first-time home buyers are an increasingly large share of the few buyers who are in the market."
