Builders Expect FHA’s New Guidelines to Cost Them 10-15% of Sales

RISMEDIA, February 20, 2010—The housing market is still far from recovered, but builders in Southern California, Texas and the Northeast report that prices are increasing, either by way of reduced incentives or outright increases to base pricing, according to John Burns Real Estate Consulting’s February survey of new home builders.

However, the new FHA guidelines are expected to have a meaningful impact on housing. Eighty-seven percent of participating builders expect to lose sales due to the new FHA guidelines, and 50% expect to lose 10% or more of sales.

“Reduced seller paid closing costs and increased down payments for low FICO scores are the provisions expected to have the biggest impact,” said Jody Kahn, a vice president with the firm.

This month, 292 home building industry executives in 99 MSAs overseeing 2,200+ communities report that traffic and sales improved in January 2010, especially in the second half of the month. “Sales gains are very focused on the entry level and in the best locations. Traffic pick-up is in quality more than quantity,” said Kahn.

Additional survey highlights include:
-Starts increased in seven of ten regions this month; especially in Northern Florida and Northern California.
-Average net sales contracts per community increased to 1.6 nationally, up from 1.4 the last couple of months. New projects are outselling legacy projects, due to better locations and lower price points.
-The average unsold, finished inventory per community decreased to 3.0 units, but is up from 2.8 units in the Fall. Inventory is expected to rise through May. Nearly all builders are starting some speculative inventory.

For more information, visit www.realestateconsulting.com.