It’s no secret that tight credit is cramping home sales, both existing and new. Now the extent of the damage to the new homes sector has been assessed and the cost is a lot greater than many assumed.
In an August National Association of Home Builders survey asking single-family builders to describe mortgage lending standards in the areas where they build, well over half indicated that standards were tight or very tight. Only 11 percent indicated that lending standards were somewhat easy and none described them as very easy.
In addition to the general question on lending standards, the survey asked builders if they had lost any sales over the last six months because the buyers involved failed to qualify for a mortgage. Eighty-three percent answered “Yes.” Of these, the average share of sales lost was 9.7 percent. Responses tended to vary by size of the builder, so all the numbers reported here are weighted based on the number of homes a builder started in 2013.
During that period covered by the survey, February through July, the Census Bureau’s monthly series shows that a total of 233,000 new homes were sold. If 83 percent of builders (weighted by size) lost 9.7 percent of their sales, it works out to an estimate of 18,700 new home sales lost in that six-month stretch because the buyers were unable to qualify for mortgages, or 8 percent of total new home sales.