Real Estate Market

Why consumers still balk at buying homes

03/03/2010 - Greater price affordability, historically low interest rates and unprecedented federal assistance should mean boom-time-level home buying.

But the convergence of potentially positive market factors in today's housing market continue to collide with conditions that undermine the confidence of consumers who might otherwise consider buying a home.

From November to December, resale home sales plummeted nearly 17 percent, the largest month-to-month decline since 1968 -- 42 years ago.

The seasonally adjusted annual rate of new home sales plummeted 11.2 percent to 309,000 in January, compared with 348,000 in December, according to the U.S. Census Bureau. It was the lowest rate since the government began keeping records in 1963 -- almost 50 years ago -- and comes after declines in November and December.

Blame the stagnant economy in general, but specific reasons why consumers aren't buying homes haven't changed much since the National Association of Homebuilders (NAHB) braved a look at the issue a year ago, according to RealEstate.com, an online operation that runs local brokerage firms in more than 30 cities nationwide.

"There's no doubt that the tax incentive is a help to first time home buyers, sometimes even more so than low interest rates," said Greg Hanson, senior vice president and general manager at RealEstate.com.

"But the fact is, it's not a magic bullet. Buyers are still running into a number of roadblocks when it comes to getting a mortgage and buying their first home," Hanson added.

Roadblocks include:

Credit issues. Credit scores continue to be one of the greatest challenges for first-time homebuyers in this economy. Low scores, debt-to-credit ratios, and credit report mistakes can stop a deal cold.

"Buyers still need to be more aware than ever of how to improve and correct their credit scores if they want to have a shot at taking advantage of the tax incentive before the deadline," said Hanson.

Lenders also haven't eased stiff underwriting requirements and in some cases, have made home loans even harder to come by.

Competition from investors. A recent National Association of Realtors (NAR) report revealed more than 25 percent of sales were paid for in cash, an indication that investors are stepping in to buy homes right out from under the noses of potential first-time home buyers, according to RealEstate.com.

"Buyers with less than 20 percent down are having a hard time competing with those investor buyers. We are even seeing investors coming back into the market to flip properties that they acquire from the foreclosure sellers. In some cases the properties are back on the market in a month's time," said Kim DiBenedetto a real estate agent with Coldwell Banker Del Monte Realty in the popular resort town of Carmel, CA.

Job market woes. The unemployment rate remained near 10 percent in January and that means tighter household budgets and fewer home sales. It may also be the harbinger of a second wave of foreclosures, once again creating more opportunities for investors and fewer for actual buyers, according to RealEstate.com.

Rick Sharga, Vice President of ReatyTrac says over-priced homes and poor lending practices generated the first wave of foreclosures which helped trigger a recession. The recession left the nation with a 10 percent unemployment rate, which generated the second wave of foreclosures.

Stuck sellers. With fewer buyers and a glut of homes on the market, sellers who want to take advantage of the expanded home buyer tax credit for move up buyers, can't sell their home. Other sellers have mortgages that are "under water". They can't cash in on the tax credit because selling their home would leave them with a balance to pay off not to mention moving costs and a real estate commission that, in many cases, would wipe out the tax credit. Nearly one-in-three home owners are underwater, according to Moody's Economy.com.

The weather. Global warming spawned climate change is impacting the housing market. Instead of preparing their home for buyer visits, sellers are shoveling record levels of snow. Buyers, facing blizzards and black outs, can't get to open houses. RealEstate.com says the extreme weather in some parts of the country during the last two months is putting a damper on the desire and ability to buy and sell homes.

"Home sales in winter are always known to be tough, but the recent severe storms may have brought them down to a whole new low," says Hanson.

 

Follow the link to continue reading the related articles

New home sales nothing to write home about

Full housing recovery at least a decade away

Housing affordability allows some "green" workers to buy, not most community workers

California home sellers' losses become first-time home buyers' gains

Latest Housing Figures Suggest Another Dip

Government Ramping Up New Short Sale Program

Housing Related Tax Incentives: Are They Really Such a Good Idea?

 

Fannie Mae & Jumbo Mortgage Rates

Just One Click! = Current Rate Chart

Pennsylvania Mortgage Rates Current Mortgage Rates - Hawaii Current Mortgage Rates - Alaska West Virginia Mortgage Rates Virginia Mortgage Rates District of Columbia Mortgage Rates Maryland Mortgage Rates Delaware Mortgage Rates New Jersey Mortgage Rates Connecticut Mortgage Rates Rhode Island Mortgage Rates Massachusetts Mortgage Rates New Hampshire Mortgage Rates Vermont Mortgage Rates New Hampshire Mortgage Rates Maine Current Mortgage Rates Vermont Mortgage Rates Current Mortgage Rates - New York Current Mortgage Rates - Michigan Current Interest Rates - Wisconsin Current Mortgage Rates - MINNESOTA Ohio Mortgage Rates Current Mortgage Rates - Kentucky Current Mortgage Rates - Indiana Illinois - Current Mortgage Rates Current Mortgage Rates - Iowa Missouri Mortgage Rates Current Mortgage Rates - North Carolina South Carolina Mortgage Rates Current Mortgage Rates - Florida Current Mortgage Rates - Georgia Current Mortgage Rates - Tennessee Current Mortgage Rates - Alabama Current Mortgage Rates - Mississippi Current Mortgage Rates - Louisiana Current Mortgage Rates - Arkansas Current Mortgage Rates - Oklahoma Current Mortgage Rates - TEXAS Current Mortgage Rates - New Mexico Current Mortgage Rates - Arizona Current Mortgage Rates - Kansas Current Mortgage Rates - Nebraska Current Mortgage Rates - Colorado Current Mortgage Rates - Wyoming South Dakota Mortgage Rates Current Mortgage Rates - North Dakota Current Rates - Montana Idaho Current Rates Washington Mortgage Rates Current Mortgage Rates - Oregon Current Mortgage Rates - Utah Current Mortgage Rates - Nevada Current Mortgage Rates - California

Start by selecting your state





iPad for Mortgage Rates