A plateau or a cliff?
Many within the housing and real estate markets are wondering whether this market has lost its mojo and is plateauing or if it is about to go over an economic cliff. At one point there seemed to be a never-ending demand for new houses and buildable plots. And then, as the interest rates rose above 7% and buyers began to disappear, sellers decided to take their homes off the market, and builders were battling skilled labor shortages. Overall, the mortgage applications have fallen to 40% of what they were in 2021, and many of the industry execs are not sure if it’s a pause or if it is a long-term correction.
One of the metrics that seems to confirm that this shift may be here for a bit is the percentage of cancellations for new home contracts in the third quarter of 2022. According to one home builder, KB Homes, they reported a 35% cancellation rate; this is compared with a 9% cancellation rate back in 2021. Lennar also reported that 21% of their orders were being canceled. And in the Phoenix market, according to some research cancellation rates have skyrocketed to 70%.
We have to remember too, that builders have been squeezed at both ends before with interest rates rising at one point and then supply chain constrictions making materials costs cut into margins.
In some markets, builders are selling to Wall Streeters who were looking for units to rent rather than to buy and flip.
If you have any questions about this information or title insurance, please contact Ralph Aponte: 732.914.1400.
Counsellors Title Agency, www.counsellorstitle.net, founded in 1996, is one of New Jersey’s most respected title agencies, serving all 21 New Jersey counties with title insurance, clearing title, escrow, tidelands searches, and closing and settlement services for commercial or industrial properties, waterfront properties and marinas, condominiums, townhouses or residential single-family homes. Counsellors Title also features its own Attorney Settlement Assistance Program™ [ASAP], which is an individual resource customized to fit the needs specifically of real estate attorneys, including, Documentation, Preparation, Disbursement of Funds, Attendance at Closing, HUD Preparation or Post-Closing Matters.
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