Housing Fundamentals Remain Strong, Hovnanian Says
Job growth and household formations are well on track to support a turnaround in the housing industry, according to Ara Hovnanian, president and CEO of Hovnanian Enterprises.
“Housing is driven by household creation,” Hovnanian told almost 200 New Jersey municipal officials and their advisors. “The demographics are solid. The United States population continues to grow.”
Hovnanian’s remarks, and other materials from his company geared to alerting the public to some of the unique home buying opportunities available in the current marketplace, have been added to NAHB’s “It’s a Great Time to Buy” section that is available to members on the association’s Web site.
With mortgage interest rates trending slightly down in recent weeks and remaining at affordable levels, and builders moving aggressively to reduce their inventories of unsold homes, the housing market has started showing some signs of stabilizing.
Mortgage rates continued inching down for the sixth consecutive week, according to the results of Freddie Mac's Primary Mortgage Market Survey released last Thursday. Thirty-year, fixed-rate mortgages averaged 6.11% for the week ending Dec. 7, down from 6.14% during the prior week and from 6.32% one year earlier.
"As a matter of fact, the 30-year FRM (fixed-rate mortgage) is very nearly the lowest it has been this year," said Frank Nothaft, Freddie Mac's chief economist. "The only other time the 30-year FRM has been lower was in January, when it fell to 6.10%," he said.
"Looking forward in the housing market, we think that housing is about two-thirds of the way through the correction," Nothaft said, "and should stabilize by mid-year 2007."
The latest indication that the market is slowly making its way back came last week from the Mortgage Bankers Association, whose Weekly Mortgage Applications survey, for the week ending Dec. 1, showed an 8.1% increase in mortgage loan application volume on a seasonally adjusted basis.
In the meantime, as balance is restored in the housing marketplace, a process that is expected by NAHB Chief Economist David Seiders to persist into the middle of 2007, Hovnanian has been reminding its customers that conditions aren’t nearly as bad as they have been during previous housing downturns, largely because the nation’s economy remains relatively vibrant.
Conditions Not So Bleak
George Economy, a sales consultant for the company at Four Seasons at South Knolls, said he remembers another time when customers weren’t beating down the doors. “I sat in 1990 in a trailer and no one came in for months,” he recalls. “No one. No one called. No one came in.”
Things aren’t nearly as bleak as they are depicted these days in the media, he says, and with a growing economy customers are still coming in, but it’s hard to create a sense of urgency. More important to many of his active adult customers, he says, is their ability to sell their current home, so keeping them interested until the marketplace regains its forward momentum is the name of the game.
“I plant seeds,” he says. “I see myself as a farmer. There are very few people who buy the first time. I have to get them to love the community, be enthusiastic about the product. You do that by spending time with them. It’s a process. It may take three or four times, but it works.”
“You have to sell yourself before you sell the company,” he adds. “How they view me is how they view the company. Being sincere and making them feel that they are the most important people in the office at this time creates credibility and confidence. They must feel that I am here for them, which I am.”
In the end, says Economy, what still works best are the practices that have brought him success since he entered the business in 1983. “I sell the same way I always have,” he says. “We might have to sit like this for a while. There’s no easy pill.”
In its marketing literature, Hovnanian concedes that the current climate probably isn’t right for investors looking to make a quick profit, “but people looking to invest in a home for the future of their family and community will find the weather just fine."
Among the reasons Hovnanian is advising families that they should be exploring what’s available in today’s housing market despite stories of gloom and doom in the press:
- Underlying demand is strong. The Harvard Joint Center for Housing Studies projects that 2 million new homes will be needed annually in the coming decade, including mobile homes, to meet population and household growth.
- A home is one of the few assets that enable a consumer to gain 100% of the appreciation without paying up front for the entire purchase. “You’ll be able to take decades to pay for the home while immediately enjoying the returns of your investment — financial and otherwise.
- Taking note of the benefits of the social and financial benefits of homeownership, government provides home owners with beneficial tax incentives.
- The economy is strong. “Every day, the mix of economic news points to a stabilizing, healthy economy. Gross National Product is up. Chain-store sales are up. Productivity is up. Job creation is up. Even housing — new and existing — is at predicted, appropriate and healthy levels and heading for solid year-end results.”
- While the annual appreciation rate in home values has been slowing this year following unprecedented increases during the past few years, home owners can soon expect home equity to accumulate at a sustainable pace, which historically has been about 6% annually.
- Home buyers have many choices. “It is, indeed, a buyer’s market. There are many opportunities for home buyers out there, and home buyers are in their best negotiating position in years. Shoppers should take full advantage of the opportunity.”
- The real reason for buying a home isn’t the money. “A home is a solid financial investment under almost any circumstance. But for most of us, the financial benefits of homeownership aren’t why we buy a home. We buy a home so we have our own sanctuary: a place to celebrate, commiserate, to raise a family and to escape from the world. Like the commercial says, that’s priceless. There’s no better time to enjoy these benefits than today.”
While it does take longer to sell a home in the current environment, Hovnanian is telling home owners that they can move to a new home by setting realistic expectations and planning properly. “Even if a ‘for sale’ sign doesn’t spark an immediate bidding war,” the builder says, “the time it will take to sell that home is predictable. Home sellers can plan the purchase of their new home to coincide with the sale of their old one. Your builder or Realtor® can help.”
To read all of the Hovnanian materials, NAHB members can click here.
To access “It’s a Great Time to Buy,” click here.
Additional resources are available to consumers at www.nahb.org/timetobuy.
For more information, e-mail Niki Clark at NAHB, or call her at 800-368-5242 x8061.
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