The following is an excerpt from an article written by Chris Schell of Schell Brothers, the largest developer in lower Delaware:
"On or shortly after January 20, we will have a package in place to seriously kick start housing. Now, ask yourself this...once the package is announced and home sellers (Builders & Existing Home Sellers) know that Obama has taken steps to significantly increase demand in housing, what do you think will happen to their willingness to offer incredible deals? I can tell you... it will significantly decline. Why would they offer a great deal when they know that they no longer need to since the housing stimulus is going to be all the incentive buyers need? Obama's stimulus package is likely to be temporary because only a temporary housing stimulus will create the desired urgency and housing demand. So Obama may do something like lowering conforming interest rates to 4.5% for 6 months only. The last time the government intervened in the housig market by providing tax credits and reduced mortgages rates was in 1975. Housing starts immdediately reacted to the stimulus and turned up within 2 months. Now, keep in mind that Housing Starts typically occur (on average) about two months after the home sale (contract signed). So Home Sales literally turned on a dime the moment the stimulus went into effect. For those who have been waiting to buy a home and can still afford to do so, they will benefit by being the first people "through the doors" and thus get the greatest selection of homes and maybe even capitalize on Builder incentives that the Builders haven't yet removed. I know becuase I am one of these builders who intends to remove or at least reduce my incentives shortly after the announcement of Obama's stimulus package."
Subscribe to:
Post Comments (Atom)
Posts
1 comment:
As a fellow builder, I think this sounds more like wishful thinking than a fact-based argument. Rates are rock-bottom today and people aren't buying because they expect prices to continue to fall. This is a rational expectation given the suppy/demand dynamic in many markets. There is an over-supply of housing as a result of over-building in the first half of this decade in order to satify investor demand. The over-supply problem is made worse by the forclosure problem, which is likely to increase in 2010 and 2011 as Alt-A mortgages re-set. Both of these issues can only be addressed by refinancing homeowners who are currently under-water. Unless and until that happens no amound of demand stimulus will stop the slide in home prices or increase sales.
Post a Comment