Soft Spring Market Say Builders At NAHB

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Our informal poll of more than a dozen home builders throughout the country indicates that the spring selling season so far has been slow. The builders we contacted reported that interest in buying new homes is strong, based on traffic in their models. But getting shoppers to pull the trigger on a new home purchase? That’s difficult. 

“Our spring selling has started slowly with weak demand,” Tim Gehan, who builds in one of the better markets, Dallas. “We are still using significant incentives on a community-by-community basis to move houses.”

Bad weather didn’t help matters in some geographic regions. “We had two weeks of extreme cold weather in February which seemed to stall out sales,” reports Tom Wade of Artistic Homes in New Mexico. “We have seen the traffic pick back up over the last couple of weeks but few actual contracts.”

“It seems to be a spring market in traffic, but not yet in contracts,” reports John Wieland, whose company does business throughout the Southeast. “While we are not even with sales from last year with its incentives (federal tax credits), we are not vastly disappointed. We think the traffic will turn into sales eventually.”

The industry clearly has its work cut out convincing potential buyers to pull the trigger. Stories like the one that ran recently in Fortune magazine can certainly help make the case that now is a good time to buy. After all, if people wait too long, opportunities may disappear.

Many actually think now is a good time to buy a home; they just aren’t doing it. The University of Michigan’s most recent Consumer Buying Sentiment Survey made headlines for finding growing consumer pessimism about long-term prospects.

Few media outlets reported that the survey’s index of buying conditions for homes rose to 159. A full 78% of respondents said that they believe buying conditions are good, the highest level since May 2009.

Consumers cite low prices (63%) and low interest rates (41%) as the primary reasons for their view. Indeed, mortgage interest rates, which traditionally rise in the spring, have slipped under 5% again. They stand at 4.86% for a 30-year, fixed-rate mortgage, according to Freddie Mac’s most recent survey.

Lower prices have made new homes more affordable than they have been for a while. A new home affordability index kept by Hanley Wood Market Intelligence shows that 61.7% of households earning the median national income could afford to purchase a new home with a median price of $202,100, using a 20% downpayment and a 30-year mortgage at 4.95%.

Many builders are banking on incentives to get buyers off the proverbial fence. The Internet is laden with offers and chat between potential buyers about how to drive the best deal.

Las Vegas’ Harmony Homes offered buyers a $15,000 “credit” in March that could be put toward whatever they desired–design options, closing costs, upgrades. Brookfield homes touts a spring sale with up to $124,000 in savings on its Facebook page, which also encourages shoppers to register for its interest list in return for a $10,000 incentive. D.R. Horton offers $5000 toward closing costs and $10,000 in incentives at its Lake Arrowhead community in Atlanta with homes priced from the $190,000s. The list goes on and on.

http://www.builderonline.com/blogs/postdetails.aspx?BlogId=thompsonsblog&postId=102389

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