The National Association of Realtors isn't the only real estate trade group to blame the national press for slowing housing sales. The National Association of Home Builders is joining the pity party with the lowest two-month reading of its sentiment index since January 1985. Any reading above 50 is considered optimistic. Right now, builders are at a pessimistic 19.
Current president Brian Catalde, a builder from El Segundo, believes that the media is fueling unrealistic expectations about how far prices will truly fall. The press routinely quotes economists who say that housing has anywhere from 10 to 25 percent more to drop before the correction stage is over.
Well, it's obvious buyers want to be correct - not wrong, so it's no wonder they're sitting on the sidelines. Even with a generous supply of incentives, home buyers aren't stupid. They don't want to see their homes lose value, and they don't have confidence that builders won't continue to knock down prices. Why buy now when your home could be worth less in three months?
New home sales nationwide are down about 23 percent from last year, and that's cause for real concern because buyers aren't flocking to the negotiating table. They're too scared.
Back in March, DR Horton CEO Don Tomnitz made a startling forecast. He said builders' pricing power wasn't going to return until 2008. Meanwhile, he said, "'07 is going to suck."
He was right, but nobody could have predicted how bad things would get. This month, Robert Toll, chairman of Toll Brothers, said somewhat more elequently that markets around the country range from "miserable to outright purgatory."
But there is some good news out there for buyers. Healthy markets are being impacted by all the negative press, which could translate into some real bargains. Also, new home inventories are historically large. With nearly record low interest rates, the house party could get started again.
One thing that would help is for builders to be a little more careful about what they say to the press. Consumers don't realize that when a builder says business is bad, it's bad for builders, not customers. That's the time for buyers to turn up the heat and ask for upgrades and other incentives.
What should you do? See what Market Conditions are like in your area. Click on Realty Times, then View Market Conditions.
