Posted by: realtormarkpalace | December 27, 2010

Real Estate Outlook: Builders Regain Optimism

by Carla Hill

Housing starts rose in December, indicating that builders may be starting to feel more optimistic about the market.

Starts rose 3.9 percent last month, this being the first rise in new-home production since August. According to data from the U.S. Commerce Department, this rise was thanks to a 7 percent gain in single-family home building.

According to the National Association of Home Builders, “Regionally, starts activity showed gains in all but one part of the country in November. The Midwest, South and West each posted gains, of 15.8 percent, 2.3 percent and 2.1 percent, respectively, while the Northeast posted a 2.5 percent decline.”

NAHB Chief Economist David Crowe says, “The modest increase in single-family starts and permits in November is consistent with a very low inventory of unsold new homes and our member surveys that have shown a degree of optimism among builders with regard to sales expectations in the next six months. However, builders continue to find it extremely difficult to obtain credit for acquisition, development and construction activities, and this is weighing on their ability to initiate viable new projects that could generate much-needed job growth.”

Credit has been difficult topic for many consumers, as well. Tightening of lending by banks has meant fewer buyers have been able to attain the goal of homeownership. Many lenders were wary of extending credit for good reason. Defaults were rampant.

Now, after a three-year slowdown, The New York Times is reporting that credit card offers are again on the rise. Lenders are “tiptoeing their way back into the higher-risk pool of customers,” says John Ulzheimer, president of consumer education at SmartCredit.com.

According to the Times, the industry is using new terminology to define borrowers — all based on credit scores. This should be even more incentive to buyers to get a handle on their credit.

These terms include: “strategic defaulters,” meaning those (many times investors) that walked away from a mortgage; “first-time defaulters” who may have lost their home after losing a job in the recession; “sloppy payers,” who don’t always pay all of their bills on time; “abusers,” who just don’t pay; and “distressed borrowers,” who are unable to pay.

The bottom line is credit is still tight, but there is hope on the horizon. Potential buyers should make their best efforts to repair damaged credit in order to move forward in the real estate market.

Published: December 27, 2010

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