The US Housing Market is on the Edge...

Posted by Ed 21 mths ago
Housing Bubble Woes: Home Builders Cut Prices, Pile on Incentives, amid Plunging Traffic of Buyers, Spiking Cancellations, Holy-Moly Mortgage Rates
To prop up sales, 24% of home builders cut prices, others tried mortgage-rate buydowns or other incentives.

“Buyer traffic is weak in many markets as more consumers remain on the sidelines due to high mortgage rates and home prices that are putting a new home purchase out of financial reach for many households,” according to the National Association of Home Builders this morning regarding its survey of home builders.

Incentives: “In another indicator of a weakening market,” and a “soft market,” over 50% of the builders reported using incentives to prop up sales or reduce cancellations – more on those cancellations in a moment. Those incentives, the NAHB said, include “mortgage rate buydowns, free amenities, and price reductions.”

Price reductions: The percentage of home builders who reported cutting prices jumped to 24% in the September survey, up from 19% in August, and up from 13% in July.

Cutting prices and using mortgage rate buydowns (when the builder subsidizes the mortgage) counteract some of the effects of soaring mortgage rates – now over 6%. When the market begins to freeze over, price cuts is what needs to happen, because home builders cannot just sit on the houses they have started on or have completed. They must sell them one way or the other. 

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