Prospective Home Buyers Unable to Sell Existing Homes, Poll Finds
Prospective home buyers are staying out of the housing market primarily because they cannot sell their existing homes and because of concerns about employment and the economy, according to a recent NAHB survey.
“The vast majority — 91% — of the NAHB members polled in our January Builders’ Economic Council Survey said that buyers are staying out of the market because they cannot sell their homes,” said David Crowe, NAHB’s chief economist. “And 88% said that buyers are reluctant because of fears about employment and the economy. Concern over jobs and the economy has increased significantly since June, when 63% of the builders surveyed cited it as a cause for consumer reluctance.”
Additionally, 75% of the builders surveyed said that buyers believe home prices will drop further, and 68% said that buyers think it is hard to get financing.
“These results make it clear that Congress must include significant housing measures in any economic stimulus legislation that it enacts,” Crowe added. “Traditionally, housing leads the economy into recession and is the first sector to recover. Until we can stop the freefall in home values and get home buyers back into the market, the economy will stay mired in recession. It is also important that Congress act swiftly because more than a third of the builders (34%) reported that buyers are staying out of the market because they think that interest rates will drop in response to government action.”
“Builders reported that current home sales are down dramatically in every price range compared to a year ago, but indicated that the declines are most pronounced in the upper ranges,” Crowe said.
According to the survey results, which were released on Jan. 23, sales of homes priced under $150,000 declined 27% and sales of homes in the $150,000 to $249,999 range were down 34%. However, builders reported that sales of homes priced $250,000 to $499,999 were down 57% and sales of $500,000 to $999,999 homes declined by 64%. Sales of homes costing $1 million or more dropped by 56%.
“Declines of this magnitude in every price range point up the necessity for Congress to act quickly and decisively,” Crowe added.
He also noted that about seven in 10 builders cut their prices in the fourth quarter of 2008, and six in 10 made no profit as a result. A significant share of those who said that they didn’t make a profit in the fourth quarter — 38% — reported that they were selling homes below cost.
Although the survey results reflected declining sales and a great deal of pessimism about the market, they also showed that builders have been adapting to the realities of the market. Eighty-nine percent of the builders surveyed said they were building lower-priced homes, and 88% said they were building smaller homes, a trend that has accelerated since May of 2008, Crowe noted.
“Like professionals in any industry, home builders are taking stock of market conditions and adjusting their products accordingly,” he said. “This shift is largely because first-time home buyers are an increasingly large share of the few buyers who remain in the market.”
Free NAHB Kit Gives Builders Back-to-Basics Tips to Navigate the Slowdown
What was once expected to be a relatively mild housing slump following three years of record new home construction and sales has given way to a significant downturn.
To help members navigate the uncharted waters of this slowdown, NAHB has compiled a comprehensive “Back to Basics” online toolkit — the best of the basics, the tried and true and the truly new. To access the toolkit, click here.
To access the “Back to Basics” toolkit, you must be an NAHB member and have a login to www.nahb.org. To create a login, go to www.nahb.org/login or click on the log-in button on the main menu bar.
For assistance, call the NAHB Member Service Center at 800-368-5242.