As we sit here poised on the edge of our seats, waiting to hear the details of how the Obama administration will use $50 billion of TARP money to ease the foreclosure crisis, a curious stat crossed the news wires.
Apparently more potential home buyers are wandering through new homes.
The National Association of Home Builders today reported in its monthly sentiment survey that while overall builder confidence in the housing market remained near record lows, builders did see an increase in buyer traffic in February. Their expectation of sales over the next six months didn’t improve much, but, again, apparently they are seeing more interest.
I’m no psychologist, but I’m interested in what exactly might be the mindset of a potential home buyer today, knowing that job losses are increasing and home prices are still falling. Do they really think the stimulus package is going to right this ship soon? Or do they think the TARP money is going to stem the tide of foreclosures and put a bottom on house prices?
I don’t think it’s any of those frankly. I think some buyers may be interested in seeing just how low the builders will go. It’s sort of like going to a disaster movie. You want to see how they’re going to save themselves. Builders are also offering all kinds of incentives, like free Ipods, just to get you to look. The good news is that there is some form of demand out there, but the bad news is that demand isn’t signing any kind of paperwork just yet. Potential buyers may just be checking in.
The incentives in the stimulus bill, like the first time home buyer tax credit, are all well and good, but buyers today face a whole lot more hurdles than any $8000 credit is going to fix. Fannie and Freddie are increasing fees on borrowers who have anything less than stellar credit, and they’re requiring plenty of money down on top of that. FHA is out there, but that carries fees as well, and rents are actually coming down, which might make a buyer wonder why exactly they need to take on the risk of a huge investment in one of the riskiest economic times in history.
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