Home Buying Conditions Better Than the News Media Say

As consumer confidence in housing has weakened under a barrage of negative media coverage sensationalizing the current mortgage credit crunch, NAHB has been stepping up its efforts to inform the public of the positive opportunities for buying a new home.

“There are some serious problems in today’s mortgage market and the availability of financing is not what it should be,” according to an NAHB op-ed piece that association members can find in the online “Back to Basics” Toolkit, along with two similar buy-now messages that are being used by the executive officers.

However, the editorial points out, the conventional, conforming loans that are the mainstay of the mortgage market have remained largely unaffected by the shakeout in lending to subprime borrowers and recent tightening of terms for jumbo loans. These loans are limited to $417,000 and conform to other standards that enable the lender to sell them to Fannie Mae and Freddie Mac, which then package the loans and sell them to investors.

“Interest rates for these mortgages remain well within the affordable range,” the editorial adds.

As an alternative to the subprime market, first-time home buyers or those who don’t quite measure up to the credit requirements that lenders are now setting for conventional loans should consider the alternative of mortgages insured by the Federal Housing Administration, which require 3% downpayments.

“The most important thing for would-be buyers is to work with the builder to find the mortgage that will enable them to buy the house of their dreams at a cost that fits their budget,” the op-ed says. "In today’s market, there is availability of new housing in a range of prices and good financing options remain, even in instances where there may be some challenges.”

The three articles cite several reasons why today is an excellent time for prospective buyers to explore opportunities to purchase a new home:

• In contrast to the bidding war for properties that was common in hot markets at the height of the housing boom, today’s buyers can shop at their leisure and deliberate over what home comes closest to filling their needs and desires.
• There is an abundance of product to choose from, new housing offers the latest in energy-saving features and other amenities, and builders are offering a range of incentives designed to sell homes.
• In a sharp departure from previous housing downturns, which coincided with economic recession, today’s economy has been performing relatively well, generating jobs and increasing household income. “Despite the dire headlines that have appeared in the news, most Americans have reasonably good expectations that the economy will remain on their side for some time to come,” NAHB says.
• The current housing price correction is helping to restore affordability. “In general, housing price declines have been most noticeable in the markets where prices rose the sharpest,” according to NAHB. “In parts of the country where the boom was not as strong, price declines have been marginal, and there have even been some exceptional areas where prices have remained on the rise. The bottom line for most existing home owners is that their homes will be worth significantly more than they paid for them once the market begins to recover — a process that is expected to begin in 2008. The repercussions for prospective buyers is that the market has provided some breathing room from the sky-high prices prevailing a year or two ago.”
• Today’s interest rates remain highly favorable for home buying. “Interest rates are typically at their highest point at the outset of a recession, and follow a downward path as the Federal Reserve eases its monetary policies to get the economy growing again. While nobody can predict the course of interest rates, with the U.S. economy continuing to grow, the Fed in all likelihood will not be slashing interest rates as housing returns to full health. Prospective buyers who are waiting for dramatically lower interest rates from those that exist today will probably be disappointed. And with rates as low as they are now, whether they realize it or not, home buyers are already looking at a good thing.”

In response to the unexpected worsening of housing conditions this summer and the likelihood that the slowdown will now continue well into next year, NAHB has republished the “Back to Basics” Toolkit and added new materials geared to helping NAHB members adopt basic practices to improve their businesses in today’s challenging marketplace.

To access the toolkit, NAHB members can click here.

To read the op-ed pieces in their entirety, members can click here. (This material has been posted in the toolkit primarily for informational purposes. If members want to use it as part of their own marketing, advertising or public relations campaign, they should first check with their local executive officer to coordinate their efforts.)