We debate it on the air pretty much every day: What will it take to get potential home buyers off the fence and into a home? Is it a tax credit? Lower interest rates? A real bottom in home prices? The official mandatory silencing of all real estate reporters??
The National Association of Home Builders, clearly needing to know more than most of us, did a survey of 700 self-described “on-the-fence” buyers, according to an article in the Washington Post. “Asked why they hadn’t committed to a purchase, 44 percent said they’re holding out for lower mortgage rates, 41 percent said they weren’t sure they could qualify for financing, and 38 percent said they expect to see lower house prices.”
Now I realize that doesn’t add up to 100 percent, so I’m guessing the respondents were allowed to give several answers to that same question. I apologize, I couldn’t get a copy of the study, as I was told that it was “proprietary.”
I’m guessing the Builders, whose research subsidiary did the study, is disappointed at the findings, given that they are pushing hard on Capitol Hill for a home buyer tax credit. They want a 10 percent credit capped at $22,000, but the study found that a tax credit ranked only 6th on the list of top ten incentives to buy a home.
The home builders are also pushing for a mortgage rate buy-down, government-funded of course, to 2.99 percent for the first six months of this year and 3.99 percent for the second—both on 30 year fixed. Better news there, as the study found the mortgage rate consumers thought would be most effective would be a 3 percent fixed-rate loan. Congressional Republicans are pushing for a 4.5 percent government-funded interest rate, so I guess lawmakers may need to rethink that one a bit.
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But then that pesky study throws yet another wrench into even a low, low interest rate. Remember, 41 percent of those polled said they weren’t sure they could qualify for a mortgage. That, unfortunately, is the trouble with a lot of the so-called “fixes” out there today, be it a refi or a loan modification or even a new loan for a new home purchase. In order to take advantage of the low rates out there, you need to have great credit, and you need to be applying for a conforming loan ($417,000 or lower).
I know, I know, what about that new conforming loan limit up to $625,000 in some more pricey markets? Sorry folks, ask any mortgage broker, and they’ll tell you that you will get a far lower interest rate on the old-fashioned conforming loan limit. Don’t even get me started on jumbos.
Oh, and the builders also found that all those free upgrades, like the fancy built-ins and the granite, and even the “green” features and certifications, aren’t all that enticing to today’s potential buyers. Suffice it to say, these folks are not exactly teetering on the fence, they’re stuck on it.
Questions? Comments? RealtyCheck@cnbc.com