With a drastic fall in the house building permits, the outlook of the real estate market in the US appears to be grim, hitting the builders' confidence badly.
The US is going to witness a drop in the number of homes constructed, with the level of house building licenses falling to a record 14-year down during October 2007, as per the US Commerce Department, according to Timesonline.
The Commerce Department states that the demand relating to construction permits which is straight away connected to the stand of the housing industry declined by 6.6% during October 2007.
The builder’s interest has fizzed out as the desire for high earning sub-prime finance mortgage securities by the investors swelled the bubble of home-pricing. Because of this, the investor market isn’t bouncing back. The builders' confidence also went down with the growing contract cancellations and banks tightening the home loan requirements. The breakdown of the bonds market along with mortgages has impelled the US banks to undertake write-downs amounting in excess of $45 Billion and made their lending criteria tight. Lesser mortgages in addition to declining prices have made even it tougher to sell or refinance.
A survey conducted by Federal Reserve during November 2007 revealed that nearly 40% of the US lenders have lifted their yardsticks concerning prime mortgage borrowers, who constitute their most acclaimed customers.
Furthermore, the residential realty market appears to be weak as mounting foreclosures between subprime borrowers have pressed down the prices leading to extraordinary delivery of unsold homes. The foreclosures amid homeowners along with adjustable rate of subprime mortgages have climbed to a record high in five years.
The enduring credit crisis has made it very challenging to obtain loans for several prospective borrowers by more strict lenders. The builders say that hacked prices along with incentives to the buyers have cast negligible impact over the housing industry, currently at the ground of the 2005-2007 recessions.
A Senior Research Analyst at RNCOS says, “The US housing industry is one of the greatest pillars of the American economy as it forms the biggest decisive factor of the consumers’ confidence and comprise around two-third of the total spending. However, the present stance of the US housing industry does not appear to favor the builders, which is the result of poor bank policies. Banks need to quickly shoulder their responsibility and make their mortgage rates and loan policies highly flexible in order to entice the consumers towards the real estate of the US”.
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