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Survey: 59% Of Home Buyers Rely on Government Mortgages
Survey finds government intervention has been a key driver to new home sales
News Release
October 21, 2009
HousingZone
Irvine, Calif. — The new home market is cooling down and government intervention has been a key driver to new home sales, according to John Burns Real Estate Consulting's October survey of home builders.
In addition to the tax credit that expires Nov. 30, government mortgage programs have been critical in 2009. The survey reveals that 59% of this year's sales have been dependent on FHA, VA or USDA financing programs with 96.5% to 100% LTV.
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The highest use of FHA financing was reported by Northern California builders, while Southern Florida builders reported the highest percentage of cash purchases. "The cash sales are most likely due to investor purchases of attached homes," said Jody Kahn, a vice president with the firm.
Not surprisingly, Southern California reported the largest use of jumbo mortgages. "The tough underwriting and higher pricing of jumbos has constrained sales of move-up homes," said Kahn.
This month's survey consists of 262 home building industry executives from public and private companies. In total, their insight is reflective of on-the-ground conditions in 86 MSAs and 1,741 communities.
"The good news for builders is that there seems to be momentum behind the effort to extend the federal tax credit and that the FHA is going to become more conservative, but not significantly curtail operations," said CEO John Burns. "Political winds can change quickly though, so stay tuned."
Survey Highlights:
- The average unsold, finished inventory per community decreased nationally to 2.7 from 3.7 last month. This significant decline in inventory indicates the speculative starts from the summer are being converted to closings. Regions reporting significant declines in inventory per community since last month include Southern California, the Northwest and Southern Florida.
- Average net sales per community dropped from 2.0 to 1.6 nationally, returning to levels last seen in June and July. The net sales rate declined in seven regions compared to only one during the prior month. While significantly better affordability, low conventional mortgage rates, and the federal tax credit continue to support new home sales, builders across the country are reporting declines in traffic and sales rates in September and into October. Some builders lacking entry level inventory to close by November 30th are losing sales to competitors. Seasonality is also contributing to declining sales.
- Last month's reports of price increases in California softened this month. Pricing in Southern California is now rated flat, while Northern California pricing is decreasing. This month, Southern Florida builders rated pricing as increasing. The direction of new home prices was unchanged nationally this month, and remains hovering near flat, as builders reporting further decreases in prices offset those builders seeing flat or increasing prices.
- Builders started more homes in 4 of 10 regions, and trimmed starts in 3 regions. The Northeast, Southeast and Northwest regions are all reporting increased starts in the 8% to 9% range. The Southern Florida region reported the largest increase in starts this month. Notable declines in starts rates were reported in the Midwest, Southern California and Northern Florida.
About John Burns Real Estate Consulting:
John Burns Real Estate Consulting is a national consulting firm that helps executives make informed decisions on the housing industry. Providing independent third-party research and analysis, John and his team consult with executives all over the country and deliver the information they need to make housing industry decisions with confidence. The company is on retainer with many of the largest companies in the housing and investment industries.
For more information visit: www.realestateconsulting.com
© 2009, Reed Business Information, a division of Reed Elsevier Inc. All Rights Reserved.