The media, both print and electronic, has presented an enormous amount of information on the “housing crisis.” We have listened to plans to help those homeowners who are in trouble meeting their mortgages. Relief here will help mitigate the infusion of discounted properties into the pool of houses available for purchase. Often bank reposed or foreclosed mortgages are listed at an amount just enough to get the mortgager out of the loan whole. Many of the houses that are on the market by owner choice have also been discounted to sell. THE PERFECT OPPORTUNITY – is before us to purchase for value.

Understanding what triggers growth in new home construction requires understanding where the demand for new homes comes from. Before we address the sources of demand, it is important to note that the quantity of homes available for resale and their duration under listing has a very significant impact on new home construction. In our area there is a surplus of homes for resale on the market, plus homes that were built on speculation. The prices of new and existing homes have been reduced and the appraisal process will make it harder to get new construction financing. Until this inventory reduces to normal or below normal levels and sale prices stabilize, the construction of new homes will be affected. Lenders are not inclined to make speculative construction loans for new home construction unless the construction loan will be exceptionally collateralized and a repayment revenue stream is in place to cover the construction note over at least a fourteen-month or more time frame.

New homes are purchased by first time home buyers, people moving up in value, people moving into the community to enter the local workforce and people moving into the community to retire. Each group has different factors influencing their decision to purchase a home, preferably a new home. The first time buyer normally moves toward the younger buyer, who may have recently graduated, married and started a family or returned to citizen level after leaving military service. The challenge for a first time homebuyer is to have a credit history that meets a certain criteria and have a sufficient down payment against the new home purchase. Credit requirements have been tightened by lenders and down-payment thresholds have been elevated. The net result is that the first-time homebuyer will take longer to be in position to qualify for a new home. THE PERFECT STORM.

The Economic Stimulus & Recovery Act recently passed provides first time homebuyers with an $8000 tax credit that does not have to be repaid. The tax credit only applies to first time homebuyers or a citizen who has not owned a home in the last three years. It is applied to your income tax return. The good news is you can go under contract for a home now and request your tax credit against your 2008 return, giving you a quick tax credit. This strategy can help the new homebuyer secure money to apply against their down payment by pledging their tax credit to a potential short term small amount lender. Extremely low interest rates and discounted home prices make buying a new home now THE PERFECT OPPORTUNITY. The tax credit will help but may not be attractive enough to a first time homebuyer to motivate them to make a major purchase during tough economic times. If you need help qualifying, get a co-signer, if you are short on putting down a significant deposit, approach family for a short-term loan. Buying a good home at a discounted price at a low interest rate will pay benefits of lower mortgage payments for many years, a very significant overall savings along the way and a profit if you sell this home in the future. Real estate, especially in a desirable and growing city like Las Cruces, is still a very good investment.

Unfortunately, those who are buying and who are not a first time homebuyer are left without a government-stimulated incentive. People who want to move up from a home built ten or more years ago are the next category of new homebuyers. In the past people would rather buy a new home rather than remodel. The same tightened lending requirements apply to this potential buyer group plus, in most instances, they have the necessity of selling their present home to complete the loan to purchase transaction. Right now, many current homeowners are refinancing their existing mortgages to take advantage of exceptionally low interest rates and some refinance products with no points. Some will just reduce their monthly mortgage payment, while others will remove equity to remodel their current home. Remodeling and refinancing are not good elements to encourage new home construction. THE PERFECT STORM.

Now we come to the “baby boomer” retiree. They want to come to Las Cruces, but face obstacles. Selling an existing house is a key and essential part of making a move to a new home, whether across town or across country, whether buying up or buying down. Many retirees now see their retirement portfolio reduced dramatically, their portfolio could have been a source of cash in the past to change their investment from stock to real estate. No one wants to sell stock when it is down as much as the present market has fallen. They, like the other category of buyer, must meet the stricter lender requirements. The conclusion is that unless given incentives, retirees will wait for better conditions to make their move. Developers and builders will need to work with lenders to come up with loan options that allow pledging of assets, whether in real estate or stock, to allow for meeting the tightened borrowing requirements.

If we listened to the news media “doom & gloom” it appears that all categories of buyers interested in a new home appear to be “locked down” for one reason or another. We know that you cannot build new homes if there is too much resale home inventory and you cannot build new homes without potential buyers. If we allow the building industry to suffer a catastrophic failure, we will deeply hurt the economy. Those that say this is a cleansing process and a few failures are good are not the people that spent a lifetime working hard to build a career, a family and the home you live in. The building industry requires help as much as any other segment of the economy. The cure to THE PERFECT STORM for new home construction is exceptionally strong incentives to purchase a new home. This can only come from government at all levels whether it is local government backing off on permit or impact fees to keep home prices down or state and federal governments giving tax incentives to the potential buyer.