Resolve why homebuyers hold back!

ONE Solution

to the

New Homes Market?

Try taking different things out of the toolkit!



Based in Irvine, John Burns Real Estate Consulting, represents almost all of the major builders in the nation. They are a housing market analyst. The really don’t use the term “economist.”) Every week, they survey up to thousands of builders and sales platforms around the country. Because they are retained by so many, they get a high level of cooperation and consumer reaction.

It is worth seeing John’s webinar at: http://www.realestateconsulting.com/video/housingrecovery.aspx

Their most current data show us that we are providing solutions to problems that don’t exist…and are ignoring some solutions that are available to us.

As reported by 240 nationwide housing executives, the reasons given for consumers not buying…

36% say concern about the economy and jobs
29% cannot sell their existing house
20% fear that home prices could decline further
10% worry about credit and qualification issues
5% lack the necessary down payment.

So, our attempts to solve the problem by creating more down payment assistance programs (DPA’s) will have a marginal impact, if any.

To many builders, DPA is the solution because it is something they understand. And, maybe because it is something where the cost can be off-loaded to someone else. Usually government.

Could home builders not follow the lead of Hyundai Motors?

Hyundai has a program that will protect its buyers if they lose their jobs and cannot make payments on a new car purchased from Hyundai. There is fine print, etc., but the essence is that you have coverage if you make the first two payments. If you lose your job after that, you cover the first $7500 of loss, turn the car back in and suffer no harm to your credit status.

As of New Year 2009, our unemployment rate was about 6.9%. It will certainly grow in the first half of 2009 and maybe beyond. But in the meantime, how many of the employed freeze their major purchases by wondering?

Some homebuilders had similar programs for homebuyers in the late 1990’s and it looks like they should come back. These are steps that builder associations could tackle, particularly if their member builders are too small to get decent pricing from insurance companies. Right now, builder associations don’t really need to spend political capital on holding back cities’ and counties’ regulation of new developments that may come out of the ground in five years.

We are trying to manage our way out of what we have. TODAY!

What we may build in a few years is a theoretical exercise. If we don’t solve our current problems, easier zoning, quicker building inspections, and contained permit fees are totally irrelevant. We may not be alive to see them.

Someone has to pay the “premium.” I believe it becomes a cost of the sale, borne by the seller. Builders would need to promote and advertise the program, but the best news is that only the successful sale needs to pay the premium. User pay.

And, there is some risk to the insurer, of course. But will our unemployment grow to 10%? 11% Perhaps. Will all of them be homebuyers…or even Hyundai buyers? The carriers can evaluate the risk and determine the premium.

So, the solution is to bring more confidence to the market, and more reasons to the lending community to provide purchase money loans.

Think about this.

If we/someone/someone ELSE/they provide(s) down payment assistance, we are asking a lender to make a loan to someone with an insufficient down payment. Pretty obvious. And, which lender wants to take on more risk with someone who has little or no skin in the game?

And, even at that, we MAY solve the purchase resistance in 5% of those presently looking at new homes.

However, if we provide some sort of job loss insurance, by definition, we are dealing with people that have jobs. And 36% of the people in sales offices who are not buying today.

We have come to the place that solutions shouldn’t (maybe musn’t!) be limited to one builder who looks at a competitive advantage. If many builders are failing, too often, the consumer reaction is to pause in the buying cycle. Pause from buying from ANY builder.

If the new home industry provides job loss “insurance” it will immediately gain a competitive advantage over existing houses. Standing inventory will be absorbed.

Neighborhoods will “gel.”

Please watch John Burns’ webinar for some macro solutions.

Think about flexing your muscle with politicians to use those ideas in resolving the housing market.

And, leverage the builder associations to find some job loss coverage and resolve the issues holding back 36% of the people in the sales offices.

Let me know if this is of interest to you.

I welcome your feedback.

HARD