Where are the Home Buyers?

According to the National Association of Homebuilders, the decline in home prices has certainly made homes more affordable for consumers. In some metro areas, existing home sales activity was a bit more brisk in the past months but overall, there seem to be the problem with the lack of qualified buyers.

Many experts attribute this to several factors. For starters, median home price is still viewed by most homebuyers to be too high compared to the pre-housing boom prices. Most homes during the housing boom were actually sold at inflated prices and even with the recent decline in home prices, they remain to be expensive.

In addition, many buyers are still waiting for the market to bottom out. Based on a report released by Wachovia, home prices may still drop by almost 20 percent by the end of 2009. Thus, it is not surprising that buyers are waiting on the sideline for now.

Another factor that plays a significant role in the present market situation is the credit crunch. Even if there are interested buyers, the stricter policies have certainly made it more difficult for these consumers to buy a home these days. Lenders have tightened their underwriting guidelines after it has been cited as one of the reasons for the current foreclosure crisis.

For those consumers who are interested to buy a home, they must have at least a credit score of 740 and above in order to enjoy lower interest rates. Previously, lenders only require a credit score of 680.

Lastly, lenders are requiring buyers to pay more down payment – as much as 20 percent of the list price. Indeed, gone are the days when lenders are offering the “no down payment” incentive to borrowers.

With all these factors to be considered, homeowners should not be surprised if there are no buyers knocking on their doors. Only way to get around this is to probably offer more discounts and incentives.