NVR Inc., the region's largest home builder, said yesterday that four out of 10 of its new-home sales in the Washington area were canceled last quarter, making it the latest builder to report that more buyers are backing out of deals.
Around the Washington market, cancellation rates have tripled in the past year, to 17 percent, according to researchers at Hanley Wood Market Intelligence. In August alone, that meant about 250 cancellations. In its most recent earnings report, builder Toll Brothers Inc. said cancellations in the quarter that ended in July had more than doubled, to 18 percent nationally, while numerous builders said in interviews that their cancellations locally had increased.
Some are abandoning their contracts even if they have significant deposits. "Buyers are abandoning five-figure deposits on their future homes because they cannot sell their existing homes or did not sell them for nearly as much as they had counted on."
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People just need to stop buying new homes before they sell their old homes.
ReplyDeleteThe market is crashing. It will be significant in Loudoun. I know a family that gave up a SIX figure deposit on their new home b/c they couldn't sell their current house. They felt they had no choice. Now they have just rolled that $100k into their existing mortgage and will stay in their current home.
ReplyDeleteForty percent is very high, much worse than I would have expected. David, I bet you're right about the downstream effect of being unable to sell their existing homes. These builders cater to the upgrade market.
ReplyDeleteThe buyers have to be highly motivated to dump their deposits, and I really don't sense that much fear of a real estate collapse yet. The wide eyed optimism is gone, but there hasn't been much dump it at any loss selling yet either. Mostly sellers are just keeping their powder dry.
So are buyers.
Buyers are in a better position to wait than the sellers, especially those with zero or negative cash flows on rental investments. Every month digs the trench a big deeper. And those propterties cost money for upkeep and repairs, money that no longer feels like it is coming back as a higher selling price.
The economy is going to keep the market from trenching deeply except in the biggest bubble areas. They went up insanely and will come down the same way.
But I thought DC was different...
ReplyDeleteI am wondering which is better- 1.) to give up a 100K deposit and get nothing for it, or 2) lower the price of your current home by 100K to sell it?
ReplyDeleteNot to answer my own question, but I think it would be walking away because 1.) you would lose 100k in equity that you "have" (which you really don't) in your current home if you lowered the price plus, 2.) you would probably also lose at least 100K in value in your new home if you ended up buying it.
Anyone?
Does anyone else think the slowly deflating DC bubble will pop after the elections? The contractors and lobbyists who have feasted off of Homeland Security and Defense dollars have to be worried that the party is over once Dems have subpeona power.
ReplyDeleteAre you kidding me? I work for a contractor in the DC area and look forward to the historically-established bonanza of increased spending if the Dems take power. Sure, it will be in non-defense agencies but that is most of my business now.
ReplyDeleteTo answer anonymous above, in a falling market the best posture is to reduce exposure. Even though dumping the deposit looks like a push compared to lowering the old house selling price, it really isn't.
ReplyDeleteThe new house raises the exposure of the buyer to downward price pressure. Keeping the old house keeps exposure neutral.
So you are right on, and this advice remains valid until the market reverses, which it will someday.
To answer anonymous above, in a falling market the best posture is to reduce exposure. Even though dumping the deposit looks like a push compared to lowering the old house selling price, it really isn't.
ReplyDeleteThe new house raises the exposure of the buyer to downward price pressure. Keeping the old house keeps exposure neutral.
So you are right on, and this advice remains valid until the market reverses, which it will someday.
Does anybody out there know if Toll Brothers ever gives back a deposit? Can one claim, because they could not sell their current home, that they are doing lender fraud if they will lend you money to buy their new home when you can't afford it? Please help.
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