Why Some Buyers Are Still Waiting

By
Real Estate Broker/Owner with RealWorks Residential

This morning I read an article in the latest issue of REALTOR magazine, by Lawrence Yun, NAR's chief economist (and an economist for all who are in the industry) about why some buyers are still waiting to buy homes. Given that we are experiencing record-low mortgage rates nationally, it's crucial to understand why such conditions are not contributing to more home sales.

Mr. Yun's article cited three factors, and while most of us may be familiar with them, it's refreshing talk about them to understand the forces in the marketplace.

  • The first factor that's deterring buyers is the availability of credit. Which varies across the nation, but is one of the main contributing factors that makes it difficult to qualify for loans.
  • The second factor, and one that's very crucial in understanding any economic activity is market confidence. The perception amongst buyers is that prices will continue to decline, and that means, that buyers are creating conditions for future declines. Specifically, as buyers hold off on purchases, "their prophecy will become reality," inventories would grow further and "we'll seee downward pressure on prices."
  • The third factor Mr Yun cited is the confidence in the overall economy. "Slow economic growth leads to economic insecurity, even among those who have jobs."

So what is the solution? Our chief economist argues that "once consumers regain confidence and banks increase lending to sound individuals, buying activity should start to pick up."

Common sense, right? It is, but the importance of these factors is crucial for any real estate professional to understand.

How soon will that happen? No one can say for sure, but based on other market news, the economy is beginning to take the steps to make that possible.

In the meantime, "high affordability and low mortgage rates will benefit those who are willing and able to purchase."

Posted by

Nicholas Tukmanian
Broker of Record
RealWorks Residential

(732) 577-9100 office

265 State Route 34
Colts Neck, NJ 07722

Comments (4)

Jeremy Gryvatz
RealWorks Residential Brokerage - Manalapan, NJ

Hey Nick!

Another Great blog post. Thanks for the Info

 

Jeremy

Nov 22, 2010 03:16 AM
Eric Kodner
Wayzata Lakes Realty: Eric Kodner Sells Twin Cities Homes - Minnetonka, MN
Wayzata Lakes Realty: Twin Cities, Madeline Island

Nick, I have several prospects who want to buy, but are afraid they won't be able to get a mortgage.  They are doing their best to consolidate or eliminate debt and taking steps to get themselves ready to buy, but by the time they achieve that, I wonder if the market will have rebounded already.

Nov 22, 2010 03:25 AM
Melanie Thompson
Mortgage Equity Team - Lynchburg, VA
Registered Mortgage Advisor

Great post. As a mortgage originator, I see borrowers who cannot qualify now, but can qualify with a little work (open accounts, pay down accounts, increase credit score, lower debt ratio, etc.). With diligence in working with the "not quite yet" borrowers, I see borrowers 1-12 months after initial contact who are now in a very good position to purchase a home. I have options down to a 580 credit score, I have options for renovation financing, and I work with a borrower to improve their credit and debt positions. It helps to work with a loan professional with additional resources beyond what the major lenders offer. 

I also have borrowers adjusting their home purchase expectations so they can rent, rather than sell, their current home. If you have a seller who is in this position, there may be another home suitable for them that allows them to qualify for a purchase without selling. It is worth exploring this option as the rental market expands and the purchase market creates additional opportunity.

Nov 22, 2010 03:27 AM
Nick Tukmanian
RealWorks Residential - Colts Neck, NJ

That seems to what most "in-need" buyers are doing to better the chances of having credit available to them. Thanks Eric!

Good tips, Melanie, thanks!

Nov 22, 2010 03:34 AM