New Home Source Blog

Why People Buy Homes

 Do you know why people buy homes? The answer to this question is what my friend Stan Kates called the greatest secret in real estate sales. I remember it clearly. He was speaking at the International Builders Show. He looked left and right, lowered his voice almost to a whisper and said, "Do you know why people buy homes?" He paused, gave a 'shush' and continued, "People buy homes because they see other people buying homes."

Finally people are buying homes again. Nowhere near the levels of 2005 or 2006, but according to the National Association of Realtors (NAR) August 21, 2009 sales report, "Existing home sales ... rose 7.2 percent to a seasonally adjusted annual rate1 of 5.24 million units in July from a level of 4.89 million in June, and are 5.0 percent above the 4.99 million-unit pace in July 2008. The last time sales rose for four consecutive months was in June 2004, and the last time sales were higher than a year earlier was November 2005."

This represents more evidence that the market bottom has been reached. I'm not sure we have hit a price bottom, but with record affordability, near record low interest rates, and HUD reports showing momentum in new housing sales, this may be the best opportunity in decades to buy a home that will prove to be a good investment.

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Blair Kuhnen, VP/GM NewHomesource.com

Housing Opportunity Index - Is it time to buy?

Is it the right time to buy a home? Being on my 5th home, I am sincerely jealous of the youngsters considering their first home. Housing affordability was a huge issue in '06 & '07. It seems every market is hitting a high in affordability. Wells Fargo and the National Association of Home Builders (NAHB) developed the Housing Opportunity Index (HOI) 18 years ago. I measures affordability as the percentage of homes sold that families earning the median income in a market can afford to buy.

In 1Q09, the HOI has hit a record level of affordability and for first time home buyers, the government is throwing in another $8,000 in tax incentives. Oh, to be young. It's been a tough market for all home sellers, but none more so than home builders. Bad news for some, but good news for you. It means you can buy a new home with all the energy and warranty advantages of a new home without the premium normally going into new housing.

Let's look at some markets and just how the affordability pendulum swings. Also, be sure to check out the home builder deals and incentives on New Home Source. Let's look at 3 markets: Atlanta, Houston, and bustling Riverside, CA.

• In Atlanta, always a great market for home buyers, in 3Q07 affordability dropped to under 64%. Now almost 83% of homes sold in Atlanta are affordable for the median income family. Check out some of the new home values in Atlanta.
• Next, there's Houston where affordability in 3Q07 dropped to 47.4% and in 1Q09 it is back up to almost 72%. Again, the Houston builders are putting it all on sale.
• Finally, at the height of the housing boom, less than 7% of the homes sold in Riverside were affordable for families earning the median income. Now, in the 1Q09, 72.6% of the homes are affordable.

...Wait. Riverside, CA is more affordable than Houston, TX? It's not a misprint. Just check out the new home bargains in Riverside. Not only that, but the state of California will kick in $10,000 on top of the $8,000 government first time buyer tax incentive.

If you need a home, now is a once in a lifetime opportunity to make the most of an incredible buyers market. Will it last? That government incentive? You must close by November 30th to get it.

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Blair Kuhnen