Aug 25 2008 9:02AM | Permalink | Email this | Comments (1) |
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A recent Harris Interactive poll found that "high home prices" and "money for a down payment" are considered the two biggest barriers for first-time home buyers. Not surprisingly (to me), "lack of confidence in the economy" ranked third. Some 31 percent of the 2,462 adults surveyed ranked high home prices first. That concern was higher in the West (39 percent) than the South (27 percent) or Midwest (26 percent). Coming up with down payment money was ranked first by 28 percent.
     Lack of confidence in the economy seems to fit at No.3 to me because the anecdotal feedback I'm getting from builders is that a large majority of potential first-time buyers have credit records that make them very difficult to qualify for a mortgage. If you're having trouble paying your bills, you'll probably have very little confidence in the economy!
     Mark Hodges, South Florida division president for Hovnanian Enterprises, has adopted a policy requiring buyers to close within 30 days of signing a sales contract. His goal is to sell all his existing inventory homes before taking any more contracts on to-be-built homes. "The reason so many buyers want to buy to-be-builts instead of standing inventory homes is that they're hoping to use the nine months of lead time to clean up their credit. Even nine months later, a lot of them still walk away rather than close. That's why cancellation rates are so high," he says.
     "Builders in other parts of the country seem to be having some luck moving first-time buyers into FHA mortgages, but here in South Florida, the people who need that assistance have the least chance of qualifying for it. They have no cash and lots of debt. We try to qualify people for FHA, but only about 10 percent of them make it," Hodges confides.
     He has a new program he calls "iDesign" that allows purchasers of inventory homes to change finishes and options in the homes, to put their own touch on the product, at Hovnanian's expense."It's a perceived value, it's working and it's better than discounting the price," Hodges says.