Home buyers back out of deals in record numbers

WSJ Online Real Estate ^ | 11-13-06 | June Fletcher and Ruth Simon

[xtinct]

A little over a year ago, buyers couldn't wait to sign contracts to purchase homes. Now, many can't wait to get out of them.

With real-estate prices falling around the country and even pro-industry trade groups predicting further declines over the next year, buyers are backing away from deals in droves. At a semiannual housing forecast conference last week in Washington, D.C., economists reported that contract-cancellation rates for big builders were running around 40% -- about twice as high as last year's levels. Anecdotally, real-estate professionals say they are seeing a similar dynamic in existing-home sales.

[goldstategop]

You would think with it being a buyer's market they would be beating a path to the door, falling all over themselves to snap up a good deal before its gone. This doesn't sound like what people do when prices are falling like a rock.

"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." -Manuel II Paleologus

[dakine]

"buyers are backing away from deals in droves."

Investors, not folks needing a place to live...

[goldstategop]

Ahhh... yeah if you're investor and the equity is heading south, I'd cancel a deal too. After all, no telling when the market will turn around.

"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." -Manuel II Paleologus

[Fairview]

So does this mean these buyers are sacrificing the earnest-money deposits they have made when they signed the original contract? It's hard to imagine doing that.

[goldstategop]

Well... they haven't put up much in earnest money and they'd be a fool to buy an overpriced house.

"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." -Manuel II Paleologus

[cinives]

If your deposit was, say $15k, but the price of the identical new house next door dropped $50k from your contract price, you'd "save" 35K by cancelling the contract. Or better, renegotiate with the builder to drop your contract price or throw in a bunch of upgrades as an incentive to keep it.

[umgud]

Investors, not folks needing a place to live...

The flipping is flopping.

[goldstategop]

That and the fact at $300K, it was just too much money. People faced overextended mortgages and the risk of foreclosure. The market is driving down prices more to a level within people's means. Its not the end of the world and there's your silver lining.

"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." -Manuel II Paleologus

[RSmithOpt]

Sounds to me that in recent months, prior to 04/2006, that most of the 'investment' into homes was basically, speculative. IOW, housing sales, for the most part, were being driven by people hoping to: Flip that House.

So, once again as in sectors that appear to be booming, greed was driving the housing market. After all, mortgage rates are still low compared to the late '80's to the mid '90's. Hmmm, a 40% decline in contracts? Is that 90% speculative? Makes me wonder about the oil industry too. Eventually, some investors always get left holding the bag.

[kinoxi]

Some of the cancellations are by people who signed new-home contracts at one price months ago, haven't yet closed, and are now stunned to see the builder drastically cutting prices on identical properties. Some are by speculators caught short by other investments they can't unload. And some are by people trapped in a chain reaction: They can't sell their old home -- or the buyer has canceled the contract -- so they are being forced to cancel the deal on a new house they are buying... "There are a whole lot of people running from contracts," says Alexandria, Va., real-estate attorney Beau Brincefield. He is currently representing more than 50 buyers who are seeking to get out of contracts on single-family homes, townhouses and condos, compared with none a year ago.

[Moonman62]

So now the doomsters are using anecdotes.

[Slings and Arrows]

Pelosi's fault.

[LibLieSlayer]

pelosi fear and dims tanking the economy... Don't you mad people want to Bash Bush a bit more??? You cut and run "conservatives" are going to get your payback in spades... pelosi style!

GOD help America...

LLS

[umgud]

I bought my house 5 years ago here in central CA. The builder gave me $5k in upgrades and an RV lot. A year later, tacts in my area had year long waiting lists and they couldn't build fast enough. My house more than trippled in value since I bought. But, alas, my kids were having a terrible time buying. My youngest daughter was able to buy a couple months ago entirely due to the downturn. This is a silver lining for those who were priced out of the market.

[goldstategop]

Buyers' remorse? We haven't see that in a long time. I have the opposite feeling: I'd like to buy before this market is gone forever.

"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." -Manuel II Paleologus

[MeneMeneTekelUpharsin]

But, but, those of us trying to warn were all gloom and doomers and naysayers and negative and...aw, skip it.

[exnavy]

My wife sells real estate here on the west coast of Michigan, it's family home buyers backing out, not investers.

[Fierce Allegiance]

I wish this were true in my area, as I am in the market to buy a home. Home prices are not going down, and the number of homes on the market is pretty low - lower than the summer of 2005 when people were getting multiple bids over asking price.

[MeneMeneTekelUpharsin]

Investors, not folks needing a place to live...

Keep it up and thanks to you and your buds. You don't know how much I appreciate your agenda.