Monday, August 20, 2007

Rising Mortgage Rates contribute to Real Estate Slowdown and Rising Inventory

For the last six to nine months, home builders have been hit hard as rising mortgage delinquency rates have made lenders much more reluctant to issue new loans, causing home purchases to fall and inventories of unsold homes to rise. In June, new-home sales had fallen more than 40 percent from their peak two years ago, and more than half a million new houses- nearly eight months of supply- sit in inventory, according to the most recent report from the National Association of Home Builders. Contract cancellations, meanwhile, have hit nearly 30 percent for some home builders.

Raleigh’s Inside the Beltline (ITB) and West Raleigh are the area’s with the highest current supply (12 months). Cary/Apex/Morrisville (CAM) is the area with the lowest current supply (4 months).

Things may not get better for a while. The National Association of Realtors said that new home sales this year were likely to fall 19 percent from last year, worse than its previous forecast of a 17.7 percent drop. First quarter ’07 the new construction market in the Triangle area recorded negative sales growth of almost 4% compared to 1st quarter ‘06.

The latest survey taken by the National Association of Home Builders indicates that 56 percent of builders are now offering incentives, up from about 45 percent a year ago.

And those incentives are growing bigger.

No comments: