BluefoxToday blog : Buyers concerned about many challenges

Buyers concerned about many challenges

The real estate market is still in a deep sleep, by many accounts. Yes, it's true that there are pockets across the land where severely-reduced home prices are attracting brave buyers and well-heeled investors to venture out to make purchase offers. That is encouraging and Las Vegas happens to be one of them. Overall, though, a solid turnaround appears to be at least a few more months away.

A January study by the National Association of Home Builders, or NAHB, tells us that the main reason prospective buyers shy away from the marketplace today is because they can't sell their existing homes. 91% of them said so. Borrowers who acquired a house during the last four years or so probably are unable to sell because they are upside down on it. That's understandable, but what proportion of the market does that represent? 20% perhaps, or it could be a little more. Or then less.

Those, the vast majority of homeowners, who bought before the bubble years have in most cases at least some equity to lean on and could possibly sell if they wanted to. They, however, choose not to. One of the key explanations seems to be that they find it difficult to qualify for a new mortgage. Underwriting guidelines are much stricter now and down payment requirements higher, for starters. Also, since values have dropped steeply, they feel they are better off waiting a few years and build as much of the lost equity back up as possible. That, though, may require a long wait as the marketplace is struggling to regain its form.

Secondly, 88% said that grave concerns about the economy and employment prevent them from buying. Although it goes against the survey numbers, this could in fact be the main reason. Many are deciding to play it safe for now and that has to be respected. 75% felt that prices will come down even further. Well, that's a tough one to predict. And 68% believe that mortgage financing is hard to secure. This category might actually play a bigger role than being fourth in importance, as was argued above.

When the economy again shows some signs of well-charted direction, as it now seems to be getting, many of the fence-sitters will undoubtedly be ready to return to the marketplace. 



Provided by: 

Esko Kiuru
Mortgage, real estate and apartment industry analyst - syndicated mortgage, housing and property management blog
My cell: 702-499-1006

Comment balloon 12 commentsEsko Kiuru • February 05 2009 10:49PM


Not selling existing homes and fear of unemployment or BEING unemployed are things that are reality Esko. Great post. You can't sugar coat reality.

Posted by Gary Woltal, Assoc. Broker Realtor SFR Dallas Ft. Worth (Keller Williams Realty) over 10 years ago


When people speak, they often come up with the reason  that they see, not that affects them. Especially it is obvious in advertising. We succumb, buy, and after the fact we are coming with reason justifying the purchase.

People do not feel comfortable, and as long as they do not feel comfortable, they do not think of the values and the benefits...

Unfortunate, but true

Posted by Jon Zolsky, Daytona Beach, FL, Buy Daytona condos for heavenly good prices (Daytona Condo Realty, 386-405-4408) over 10 years ago

I am definitely looking forward to the turnaround. We are starting to see traction in Denver, CO

Posted by Steven Wright, CRS - Home Real Estate - 720-989-5283 (Home Real Estate) over 10 years ago


The lending industry has tightened their requirements so much that even if some people wanted to buy the couldn't. They are really squeezing investors out of the market, even if they have a proven track record. Now they require 30% down and lots of hoops to jump through. I understand the need for controls, but I think they have taken it a little too far.

Posted by Diane Lynch, Real Estate Broker (Realty Executives Premiere) over 10 years ago

We are seeing exactly that a client wants to sell and buy a different home but now they are thinking of not selling inc ase the can't get a new loan on their next place.

They are spooked

Posted by David Timm, CRS, EcoBroker, GRI, ABR (Coldwell Banker Residential Brokerage) over 10 years ago

Buyers are definitely spooked about getting loans.  I had several buyers lined up from a referral.  The referral went through the mortgage process and it was a NIGHTMARE.  Since this poor woman had a 780 FICO, plenty of cash in the bank and a relatively recession-proof job AND what she was buying was WELL within her was inexplicable. The lenders just chewed her to bits.  I called the bank and said "if you aren't lending to her you aren't lending to anyone...So do EVERYONE a favor - if you turn her down, simply CLOSE YOUR DOORS before you are responsible for someone jumping off the Tappan Zee bridge!"  The buyers she referred to me got scared when they saw the way she was treated.  I'm trying to coax them back into the water -but after that nightmare, its a tough sell.

Posted by Ruthmarie Hicks (Keller Williams NY Realty - 120 Bloomingdale Road #101, White Plains NY 10605) over 10 years ago


The uncertain employment scene is a major factor here, I agree.

Posted by Esko Kiuru over 10 years ago


It's true that studies can be somewhat inaccurate.

Posted by Esko Kiuru over 10 years ago


The entire industry seems to be lean and mean and primed to go.

Posted by Esko Kiuru over 10 years ago


I'm with you. The mortgage industry swung from one extreme to the other.

Posted by Esko Kiuru over 10 years ago


Very true. Getting a mortgage approval is a high hurdle for many who want to move.

Posted by Esko Kiuru over 10 years ago


Unfortunately lenders now are extra cautious and that delays a nice housing recovery.

Posted by Esko Kiuru over 10 years ago