A Few Unhealthy Home Purchase Statistics

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, homebuilders 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".

Comments

[Michael Clark:]

It's nice to get some reality on occasion.

Oct 26 06:53 AM

[Smalltownba...:]

Those South FL cash buyers are actually Medicare Fraudsters reported on 60 minutes last night but hey, at least they are putting some of the cash they are bilking from us back into the economy.

Real housing recovery is 2-3 years away. Over-inflated markets still have room to fall but some have reached bottom where land value is virtually nil and foreclosed homes are being sold for under cost to build. Next waive of declines in value will be inside the beltways in the city markets that have continued to hold much of their value. Presure from lower prices in the near suburbs will force them down.

Oct 26 09:18 AM