Affiliate Marketing

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by Gaurav Bhola, MSM

PersonalHomeLoanMortgages.com

Homebuilders have been in rough waters for the last couple of months. Their new home inventory has been sitting practically idle in the down housing market. A recent survey of homebuilders' sentiment reflected a 16-year low in their confidence in the housing market.

The homebuilders' quantified sentiment manifested in the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) is down two points to 22, the lowest measure in 16-years. The preceding HMI survey results in July were at 28 points. A level on the HMI below 50 points shows builder sentiment of poor market conditions.

The HMI takes into account builders' assessment of current housing market conditions, outlook for market conditions in six months and existing housing sales. Homebuilders are of the consensus that new home sales are not going to pick up anytime soon, at earliest sometime next year.

The home loan industry has been in turmoil since the beginning of the year and this has made an impact in others area of the economy. The increasing defaults in the subprime mortgage arena have triggered decline in global stock markets, loss in value of multi-million and billion dollar hedge funds, concerns about credit liquidity, increasing home foreclosures, oversupply of homes, tightening home loan lending standards by mortgage lenders, mortgage brokers, and more.

The stricter lending by mortgage lenders has led many potential homebuyers being denied a home loan, even borrowers with good credit. This has added further burden on builders' overcapacity of homes. Consumers have choices for the first time since the past housing boom and they are exercising that choice; in many cases by shopping around for the best deals or by staying on the sidelines until home prices hit the bottom.

Even slashing prices and offering free home upgrades has not helped to improve sales of new single family homes. New home construction has also declined while permits for rental construction have gone up. The building permits declined by 7.5 percent in June to 1.406 million units. This was scarcely above the 1.402 million unit rate of June 1997 and somewhat lower than the 1.48 million unit rate that analysts had predicted.

The top six homebuilders in terms of revenue reported loses last quarter and predict loses to continue well into next year. The construction of homes, among infrastructure construction activity makes important contributions to the U.S. economy. A slowdown in construction activity can add to the ripple created by the housing market, sending the economy to lower ebb.

Nationally, home prices are falling, surprisingly still retaining most of their value. For a fourth quarter in a row home prices have gone down. Last quarter, median single-family home prices were down 1.5 percent, to $223,800.

Presently, builders are mired in a quicksand of their making. In the boom years, in a rush to sell homes, builders' mortgage divisions and affiliated mortgage lenders approved mortgage loans to borrowers that wouldn't have qualified in a sensible atmosphere. Now, builders taste the bitter fruit produced from the tree they planted.

PersonalHomeLoanMortgages.com

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