Starting to Be Housing Bust 2 for Homebuilders

By Wolf Richter
Wolf Street
December 11, 2022
Category: Finance & Economics
Region: United States

If a homebuilder cannot sell their ballooning inventory of unsold new houses to households, at current prices and mortgage rates, amid plunging sales and soaring cancellation rates of signed contracts – topping out at 45% in the Southwest and at 38% in Texas – despite aggressive incentives such as mortgage-rate buydowns to stimulate sales and prevent cancellations, well, whom are homebuilders supposed to sell those houses to? Rental operations? That may be hard too because many have pulled back for all the same reasons as households: Prices are too high, and financing is too costly. …Homebuilders have pitched at least 40,000 new houses to rental operators in recent months, Jeff Cline, an executive director at commercial real-estate advisory SVN, told Bloomberg. He said that many of these houses had originally been sold to individual buyers who then canceled the purchase contract. …Cancellations of signed contracts with individual buyers have spiked.

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