With fear of losing their homes from repossession, potential homebuyers hold their horses. This piles-up more newly-built homes, depressing the home construction industry.
The National Association of Home Builders announced that the preliminary NAHB/Wells Fargo Housing Market Index or HMI was just 8 this January. The HMI in January was 9. This month is a record breaking low since in the 24 years of the HMI.
Readings below 50 means homebuilders sees a poor housing market.
Eric Belsky of Harvard University Joint Center for Housing Studies says that the flooding of foreclosure homes contributes to the struggling homebuilders. Throw in the slowing demand and difficult loaning process, give so little hope for new home construction.
To help the foreclosure-troubled, mortgage rates are brought down. With more manageable loans, the housing industry must be re-stimulated. But that is not the case since the demand is still very low.
Qualified homebuyers are still reluctant to buy new homes with the uncertainty of home prices, doubtful economy and indefinite job permanence. They would not risk ending up in foreclosure.
This is the worst housing status since the Great Depression. Unsold homes pile up in the market, banks are harder to their borrowers and more homeowners lose their properties through repossession.
NAHB Chairman Sandy Dunn thinks that the housing market will not do any better unless the government takes thoughtful actions to attract potential homebuyers to consider purchasing.
HMI for single-family homes are now only at 6 following a 2-point fall. But hopes are high that the gauge will reach 17. Buyer Traffic also increased from 7 to 8.
As of now, homebuilders are left with no choice but to slow down new home production since there are still stocks of unsold ones. With low consumer confidence, they are now cutting down prices to pay for debt and survive.
The falling HMI, increasing unsold homes in the market and repossessed homes, the housing market needs some saving. The government must be tactful and strategic in solving this crisis.
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