Builders: Bad Credit Mortgage Problems Not Contained

Are the problems swirling around the bad credit home loan market abating, giving hope to a housing market stagnant at best and in turmoil at worst?

Let’s ask the nation’s home builder chiefs.

The National Association of Home Builders (NAHB) index of current sales of new single-family homes edged down a tick to 29 in the June survey, the lowest reading since early 1991.

Why? David Seiders, the NAHB’s chief economist, says:

“It’s clear that the ongoing crisis in the [bad credit mortgage] sector has prompted tighter lending standards in much of the home loan market, while interest rates on prime-quality home mortgages have moved up considerably during the past month along with long-term Treasury rates.”

In other words, prime rate mortgages are getting more expensive. This at a time when home prices are still up 100 percent over 2000 levels in many of the nation’s markets.

The president of the NAHB, Brian Catalde, a home builder from El Segundo, Calif., added some flavor:

“Builders continue to report serious impacts of tighter home loan standards on current home sales as well as cancellations, and they continue to trim prices and offer a variety of non-price incentives to work down sizable inventory positions.”

The June drop in the homes-sold index marks the fourth consecutive monthly decline. If May housing starts, which will be reported tomorrow, are not down sharply, then there will be about as much disconnect from reality in the housing market data as there is in the retail sales data.

As mortgage defaults continue to rise and regulators move to issue far more restrictive mortgage lending “guidelines,” bank credit growth is likely to slow more, experts predict.

SOURCE: South Bend Tribune