Thursday, February 5, 2009
New Home Construction Down, New Home Purchases Up
By Michael Boshnack
New construction of homes hit its lowest level since 1963 (Clifford). This is in part due to the economic crisis, but the more direct reason is that people are looking to take advantage of the economic situation, and instead of putting money into constructing a new home a more viable option is to buy a foreclosed home at a huge discount. So during this time the number of newly bought houses actually increased.
Banks do not want their properties they have loaned out money for to be foreclosed for two main reasons. One reason is they have to deal with the transaction costs and time commitment of selling a home and secondly because of the depressed real estate prices they often do not recover their initial investment. To help decrease the number of foreclosures banks are trying to increase lending to qualified individuals to refinance their mortgages with relatively cheap mortgage origination fees. This will help better their chances of recovering their investments from their debtors.
The government has also tried to help stimulate the housing market by offering a $7,500 tax credit for any first time buyers. This is part of the new stimulus plan to keep the housing market more liquid.
Homebuyers get a bonus in the stimulus bill
Banks working to prevent foreclosures
New home sales plunge to lowest on record