BluefoxToday blog : Improving resales spur builders to offer discounted mortgages

Improving resales spur builders to offer discounted mortgages

Home builders have been absorbing severe body blows for a while with their over-priced product and too much supply. Using Las Vegas as an example, the scenario here easily applies to many areas of the country, the troubles really began gathering steam two-three years ago and haven't let up since. That seems like enough time to put together a new strategy to combat the obvious oversupply but they somehow have been slow in doing anything substantial. Besides cutting back production, not enough it seems, and reducing the average size, they are now trying something different; offer cut-rate mortgage financing.

Some of the bigger firms are going from 1% to 1.5% below the current average interest rates for 30-year fixed. For starters, that ought to catch the eye of some prospects. In addition, at least one of them advertises a mortgage insurance option in case of a job loss. The heavy focus has now shifted to the finance side to generate sales that are so hard to come by in this slow economic environment.

Housing hasn't been this disjointed in a long while between the existing home sector and the new one. Still keeping in mind Las Vegas, resales are now doing rather well here in the lower end of the real estate market because foreclosures have pushed prices down hard. New homes can't compete with them at all, so that's why the financial incentives were introduced. But it's doubtful that they'll make much of a difference because the price gap is so wide. And it can get even wider in the coming months if foreclosures keep on piling up, as some experts suggest, and lenders turn around and list them for sale at ever-decreasing prices to get them quickly off their books.

Home builders predictably will remain between the rock and the hard place for now, even after introducing these mortgage finance incentives.

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Provided by: 

Esko Kiuru
Mortgage, real estate and apartment industry analyst 

www.BluefoxToday.com - syndicated mortgage, housing and property management blog

eskokiuru@gmail.com
My cell: 702-499-1006

Comment balloon 10 commentsEsko Kiuru • January 29 2009 10:36PM

Comments

Esko, Las Vegas with the problems with the new homes and oversupply, you all have had the pendulum swing way over the other way. It will take quite awhile to clear that inventory.

Posted by Gary Woltal, Assoc. Broker Realtor SFR Dallas Ft. Worth (Keller Williams Realty) over 9 years ago

I love information on markets and this is some of the best. Good luck>

Posted by Terry Miller, Miller Homes Group and Tyler Apartment Locator (Miller Homes Group) over 9 years ago

Jeff, all builder should consider buying points to buy the rate down for their buyers. 

Posted by George Souto, Your Connecticut Mortgage Expert (George Souto NMLS #65149 FHA, CHFA, VA Mortgages) over 9 years ago

Gary,

I don't know what's going on sometimes, but builders are still putting up homes here. Probably just for practice.

Posted by Esko Kiuru over 9 years ago

Terry,

Thanks. I'm in the middle of it and am keen on knowing how it's shaping up.

Posted by Esko Kiuru over 9 years ago

George,

That would do it for them.

Posted by Esko Kiuru over 9 years ago

I always enjoy your blog & value your opinion.  Now that rates up up again - do you agree with all the lenders telling me they will be down in February or are they on the rise again? I suspect the latter.  With all the paper the Fed is printing if rates stay low...who will buy our treasuries?  Your thoughts?

Posted by June Stark, Las Vegas Condos & Luxury Homes Expert (Elite Realty-Luxury Homes & Condos On & Off the Strip) over 9 years ago

June,

Thanks. Predicting the direction of rates is a tough job. If the government keeps buying mortgage-backed paper they'll stay low, so let's hope they'll do that, for now anyway.

Posted by Esko Kiuru over 9 years ago

Thanks for the speedy response.  BTW- If condo hotel finacning opens up - please put me on the top of your call list! 

Posted by June Stark, Las Vegas Condos & Luxury Homes Expert (Elite Realty-Luxury Homes & Condos On & Off the Strip) over 9 years ago

June,

I'll keep you in mind about condo-hotel funding. It'll eventually come back.

Posted by Esko Kiuru over 9 years ago

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