The number of distressed properties across the nation has resulted in a range of effects. Most notably, though, has been the effect on non-distressed homes in neighboring areas and communities.
Perhaps no one has been harder hit than builders of new homes. The National Association of Home Builders (NAHB) reports that one out of three builders are reporting losing signed contracts during the preceding six months because appraisals are coming in lower than contract sales prices.
It is these new homes that are struggling to hold value amidst the glut of distressed homes. The NAHB reports, "Too often, due to faulty appraisal practices, brand new homes with sparkling appliances and interior upgrades get compared to a distressed property that has been sitting vacant and in disrepair."
With that sort of profit margin, it's no wonder that many builders are staying on the sidelines. Yet, this is pushing the economy to the brink. The NAHB reports that new-home construction is a key to economic recovery. One hundred new homes can mean 300 full-time jobs and $8.9 million in federal, state, and local tax revenue.
"Resolving inappropriate appraisal practices and restoring the flow of credit to home builders will not only help to put America back to work, it will provide badly needed tax revenues that is essential for local governments to support schools, police and firefighters in communities across the land," said NAHB Chairman Bob Nielsen.
There is good news for one area of the market, though. "Multifamily construction continues to be the bright spot in the overall housing market," said NAHB Chief Economist David Crowe. "While household formations have been below trend, those who are forming new households are becoming renters and this trend is likely to continue until consumers' confidence returns."
Single-family home construction and sales may be lagging, but it is apartments and condos that are playing a large role in today's housing market. Stillman Knight, chairman of NAHB's Multifamily Council Board of Trustees and president and CEO of the Knight Company of Alexandria, Va, reports, "The construction of these units not only brings jobs to local communities, but also provides an adequate stock of housing for areas with rapid population growth.
Buyers are taking advantage of today's low prices and high levels of affordability. The Mortgage Bankers Association (MBA) reports that mortgage application were up 4.1 percent from the week prior. Refinancings were up 9.3 over the previous week and are now at the highest level since November 4th of this year.