Some Stymied House Sellers Have Stopped Holding Out
Inside Tucson Business reports from Arizona. “University of Arizona economist Marshall Vest looked around the room at the Arizona Inn before delivering an economic update last week. ‘Does anyone know a good joke? We need to lighten things up a bit.’ No one offered, so Vest continued.”
“‘The economy is losing momentum,’ he said. ‘Business confidence is plunging, housing is still in a recession – and could be for a while still – and the labor market is deteriorating.’”
“Vest released the latest Business Leaders Confidence Index, showing it fell 8 points. The index, released at the start of each quarter, measures business leaders’ expectations for the next three months. Taken by components, business leaders, both in Tucson and statewide are not optimistic in any one of six categories.”
“‘Anyone have a joke?’ Vest asked a second time.”
“He believes a housing recession has been prolonged and no foreseeable end at this time. ‘We had just an inventory problem with housing before,’ Vest said. ‘Now with the credit crunch we have an even bigger problem in housing that will take longer to turn around. The asset bubble has burst.’”
“The biggest problem of a lingering housing recession, he said is that it was the housing boom that really fueled growth for several years in Arizona.”
“‘Housing accounted for 25 percent of all new jobs in Arizona,’ Vest said. ‘Tucson is selling 13,000 homes annually and there is an eight month supply of housing on the market.’ All those factors in housing are leading to price declines.”
The Arizona Republic. “In a new sign of Phoenix’s slowing housing market, the city’s Development Services Department plans to cut about 10 percent of its staff in coming months for lack of work.”
“‘We experienced a very significant downturn in July and August,’ said David Cavazos, a deputy city manager. ‘There’s a large inventory of existing homes, and whenever that happens, there’s a likelihood that there will be a slowdown in new home construction.’”
“Development Services Director Lionel Lyons said Phoenix officials expected that staff cutbacks would be necessary at some point given the cyclical nature of the housing industry. ‘There’s no conceivable way that the 2004-05 levels could continue without having a downturn,’ he said.”
“During the first six months this year, the number of net new housing units declined in Pinal County, according to data from the Central Arizona Association of Governments.”
“There were 5,152 new houses added in the year’s first two quarters, compared to more than 7,700 in the first two quarters of 2006.”
“‘The declines in completions for the first two quarters in 2007 weren’t as deep as I’d thought they might have been,’ said Jack Tomasik, planning director for the governments association.”
“Though the Valley’s housing market has cooled, it remains one of the nation’s top five markets, said R.L. Brown, publisher of the Phoenix Housing Market Letter. Homebuilders are not likely to stop working.”
“‘Builders are going to bring on new subdivisions,’ he said. ‘It’s going to be a continuing thing.’”
The East Valley Tribune from Arizona. “The Queen Creek region of Pinal County is continuing to burgeon with another new home development under way, even as many area homeowners struggle to sell their properties in a down market.”
“National builder Shea Homes recently opened Cabrillo Canyon, a 107-home development. Canada-based builder Mattamy Homes has started work on 250 homes in two subdivisions in the area. Property owner Magellan Partners Queen Creek LLC is planning a subdivision of 61 custom homes. And Shea is working on a more than one-square mile development that will have nearly 2,400 homes.”
“Homes in Shea’s Cabrillo Canyon will range in size from 1,501 to 2,470 square feet with prices starting from the $130,000’s. The houses are one- and two-story with three to four bedrooms and two to three bathrooms.”
“With the housing market still deteriorating, some stymied house sellers have stopped holding out for a sale and are veering down a different path — becoming a landlord.”
“Would-be landlords may get more than they bargained for. ‘You can’t just sit back and collect rent,’ said author Janet Portman. ‘You’re in for a steep learning curve, and you could easily get into huge trouble.’”
“Renting out a home also has financial implications. Homeowners often won’t be able to command a high enough rent to cover the entire monthly mortgage payment, Norton said. A recent client of Norton’s had a roughly $2,400 mortgage payment but could only get $1,450 in rent.”
In Business Las Vegas from Nevada. “Last week Gov. Jim Gibbons…called for an Oct. 4 economic summit on housing, and Buckley convened a special subcommittee on mortgage lending. In his speech, Gibbons talked about how foreclosure filings have more than tripled since last year and pointed out that during the first six months of 2007, Las Vegas had one foreclosure filing per 31 households.”
“‘Foreclosures are putting downward pressure on home prices,’ Gibbons said. ‘In Southern Nevada, home inventory is at historic levels and 46 percent of those homes are empty. That is negatively impacting home values. For every one percent decline in housing prices, that costs single-family residential property owners $800 million.’”
“There are mixed feelings about how far government should go in helping those who take out loans they can no longer afford.”
“‘Michael Krein, president of the National REO Brokers Association, handles foreclosures in Las Vegas. Krein said he believes in letting the market readjust on its own without a bailout. Most of the foreclosures he handles involves speculators and the homeowners who got hurt are adults who should have known better.”
“‘If you bail out the market with cheap financing, prices stay artificially high,’ Krein said. ‘Just let the market readjust and people will be able to afford a home again.’”
“Who would have thought it? The price of land is so high that some developers in Southern Nevada said they are finding better opportunities right now in California. That was one of the surprising revelations in a recent forum on mixed-use development.”
“‘There is a lot of land out there, but it is way too expensive,’ said Michael Newman, senior VP with the Trammell Crow Co. in Las Vegas. ‘Unless, we see some adjustment here, I have grave concerns.’”
“Newman said there are many landowners who have speculated and questions how long they can hold out given their carrying costs. He said he’s seen land off the Las Vegas Beltway that is priced at $1.3 million an acre and there is no use that would support that.”
“‘It is going to be an interesting dynamic to watch,’ Newman said.”
“Some panelists suggested that some of those land owners and smaller developers are going to lose their properties over the next two years.”
“Douglas Crook, managing director of Christopher Commercial, which is developing lofts, said there are going to be challenges in closing sales given what’s happening with the housing credit crunch. Lenders are tightening up on jumbo loans of more than $417,000.”
The Review Journal from Nevada. “The end is near for so-called stated-income mortgage loans in Nevada because of a consumer protection law enacted earlier this year, some mortgage lenders say. Assembly Bill 440, sponsored by Assemblyman Marcus Conklin, contains a provision that makes stated-income loans a crime, according to some legal interpretations.”
“‘You have an obligation Mr. Bank or Banker, to verify that the story you’re being told (about the buyer’s income) is true,’ Conklin said.”
“Nevada Mortgage Lending Commission Joseph Waltuch has already issued written guidance that his office will not take action against mortgage brokers who collect evidence about a borrower’s ability to repay when documents aren’t available to verify the all the borrower’s income.’
“But critics say that hasn’t persuaded lenders on Wall Street and big banks, who still believe that buying stated-income loans may become a felony in Nevada.”
“Given the possibility of jail time, ‘nobody is going to do that,’ said Brock Davis, president of the Southern Nevada Chapter of the Mortgage Bankers Association. ‘The risk is too big.’”
“Many people who took out adjustable rate loans during the housing boom are already facing the possibility of not being able to make their monthly payments when the interest rates are reset higher, Brock said.”
“The new law could make it even more difficult for many of those homeowners to refinance their mortgages, because they won’t be able to offer proof of income, Davis said. To sell, these homeowners often must write a check for the difference between the amount owed and the amount the house is sold for.”
“For many of the homeowners that get caught by higher mortgage bills, foreclosure will be the only other option, he said. ‘That’s the big wave of foreclosures that’s about to happen,’ Davis said.”
“Bill Ochs, owner of Nevada Mortgage, and other mortgage lenders note that Wall Street has stopped buying so-called ‘liar loans’ and curtailed other lax lending practices.”
“Conklin said increasingly conservative lenders and mortgage loan investors — but not the bill he sponsored — are making it harder to get mortgage loans in Nevada. ‘Some of these loans aren’t going to be made anymore. They’re just bad investments,’ Conklin said.”
‘There’s no conceivable way that the 2004-05 levels could continue without having a downturn,’ he said.’
Every boom contains within it the seeds of its own demise.
The emperor has no close, financially
“He believes a housing recession has been prolonged and no foreseeable end at this time. ‘We had just an inventory problem with housing before,’ Vest said. ‘Now with the credit crunch we have an even bigger problem in housing that will take longer to turn around. The asset bubble has burst.’”
The emperor has no
closeclosingsWhen these land speculators start to puke out land at lower prices, builders will build at lower price points. The competition for available buyers should continue for several years. People that bought in the last few years are toast. We’ve seen the major builders walk from land options over the last year. That land will have to be renegotiated at lower prices, making possible for the builders to build at lower prices. The competition from builders to undercut the existing home sellers, for the few buyers available, should keep prices down for years.
I used to tell my boss that the builders would lead the pricing down and he would look at me like I just pulled out my willy. It looks like we were all right. Go builders!
So, you’ve seen that look from your boss before?
Maybe he works for Sen. Craig . . .
HAW! Ahahaw!
Good question, there. And…?
With the price of lumber down, about 30%, and labor cheaper and more available, the builders will do what they have to in order to survive. Over the next year builders will be flushing out their higher cost basis houses and begin building at a lower cost basis. At one point they’ll be able to build houses a lot cheaper than a few years ago, and still make a profit. The nominal profits may not be what they used to be but smart builders will adapt.
At some point, and perhaps we’ve reached it already…
Raw land will stay that way, for a long time~
Builders gorged on land in the past and now they are being choked to death by it.
Some argue, excluding land charges our margins are positive. However, that’s like saying we are making money on the frame but losing our a$$es on the lot!
Maybe they’ll start building reasonable sized homes - I’m betting subdivisions with 1500 to 2000 sq ft homes, well placed, good quality building and NO stainless/granite would sell like hotcakes if priced right.
I’ve never once encountered a restaurant where they ran out of hotcakes, because they were selling so well…
Before this is all said and done, I doubt that builders will be doing any large scale buiding for decades other than ‘build to suit’ construction. Check out what happened from 1928 to 1941 and then tell me anybodys gonna be building anything substantial for the foreseeable future. Too many existing structures not enough financing nor REAL demand, not even at a nationwide discount of 30% from here.
do the math!
“There are mixed feelings about how far government should go in helping those who take out loans they can no longer afford.”
“‘Michael Krein, president of the National REO Brokers Association, handles foreclosures in Las Vegas. Krein said he believes in letting the market readjust on its own without a bailout. Most of the foreclosures he handles involves speculators and the homeowners who got hurt are adults who should have known better.”
“‘If you bail out the market with cheap financing, prices stay artificially high,’ Krein said. ‘Just let the market readjust and people will be able to afford a home again.’”
Hmm? So is the NREO…BA (not catchy!) going to be out front now, playing bad cop to the NAR’s good cop?
maybe i’m missing something, but i Googled this NREOBA and it seems to be some little outfit in Henderson NV.
What is it with these homebuilder savants and their mantra gone wrong song?
“If we build it, they’ll buy it”
“Though the Valley’s housing market has cooled, it remains one of the nation’s top five markets, said R.L. Brown, publisher of the Phoenix Housing Market Letter. Homebuilders are not likely to stop working.”
They will soon!
A little Sunday morning “bubble” levity.
http://tinyurl.com/2fyddl
Funny. “My payment is about to go from $200 to 17 grand.” The sad part is it was probably a true story.
geez, another one of those sites that won’t let you back out. how do they do that?
“Bill Ochs, owner of Nevada Mortgage, and other mortgage lenders note that Wall Street has stopped buying so-called ‘liar loans’ and curtailed other lax lending practices.”
And now that the market is performing a self-serve enema the politicians jump in with regulation. They are a day late and a dollar short, once again. But they will look like they’ve done something. It’s like telling a kid not to play with matches, after the house is lying in a smoldering heap.
US housing market in freefall dive
Sales of new homes in the US plunged in August at the fastest rate since modern records began, prompting fears the economy is sliding into a full-blown recession.
Total sales dropped 8.3pc on the month and are now down 21.2pc during the past year, a sign that the credit crunch has cut off mortgage funding for large numbers of people. JP Morgan now expects sales to fall by more than half from their peak before touching bottom well into next year.
http://tinyurl.com/3dqhsa
We are not out of the woods yet. We are just entering them. From the link:
“We’re still a long way from resolving this whole crisis,” said Robert McAdie, head of credit at Barclays Capital. “Banks are not willing to lend to each other beyond a week. The current situation is more systemic than the crisis in 1998. It effects far more institutions and will have a much greater impact on the global economy.”
He said the relief rally in stock markets since the Fed slashed rates would come face to face with reality soon enough. “The equity markets are pricing in a ‘Bernanke Put’. They are betting that the Fed will cut again and again, but they not factoring in the effect that this credit squeeze is having on the financial system,” he said. “Cheap money is now history. There are not going to be any more of the big leveraged buy-out deals for a long time because the CLO [collateralised loan obligations] market that financed them is effectively closed,” he said.
Cognitive disconnect (again!)…
“fastest rate since modern records began”
vrs.
“sliding into”
Price declines are starting but it will take 2-3 years just to get back to simply “overpriced” levels. Homes that sold for $350k in 2001 are still $700k+ today.
We’ve got a long way to go. And all these “free market” bailouts will slow down the price reductions.
Homes that sold for $350k in 2001 are still $700k+ today.
Stop quoting these in dollars. Homes that sold for 350/30 = 11.7K barrels of petroleum in 2001 are now 700/80 = 8.75K barrels of petroleum. Or, perhaps the unit should be ‘ramens per house’
Maybe we should request paychecks in terms of barrels of oil instead of US dollars?
Brilliant!
These bailouts won’t hold the market long…
1. too small…
2. once people realize the prices are not going back up any time soon (before 2012…and perhaps reach 2005 prices in great areas by 2015…unless dollar implodes), they will walk.
3. #2 + on going resets + people who put 20% - 30% down will find themselves under water in 2009-10-11 and walk creating an ongoing stream of foreclosures…
Prices may bottom in 2010 +/- a few months to 1 year. They will bottom out below rental value except for rare, prime properties that for some reason are worth more than rental value (e.g. scarcity where they can’t build, location, historical value).
“‘We had just an inventory problem with housing before,’ Vest said. ‘Now with the credit crunch we have an even bigger problem in housing that will take longer to turn around. The asset bubble has burst.’”
Send a memo to the NAR. Those clowns argue the market will go back up to normal in a few months.
I’ve been waiting for months to see this credit crunch hit Main Street. It is crushing and impossible to ignore. The carnage is here and it’s happening now!
Hey Guv,
I’d be only to happy to come to the official ceremony, where they stick a fork in gambling town, usa
RSVP?
“Last week Gov. Jim Gibbons…called for an Oct. 4 economic summit on housing, and Buckley convened a special subcommittee on mortgage lending. In his speech, Gibbons talked about how foreclosure filings have more than tripled since last year and pointed out that during the first six months of 2007, Las Vegas had one foreclosure filing per 31 households.”
NOTE: 1 foreclosure filing per 31 HOUSEHOLDS, not homeowers, therfore if approx 70% own / 30% rent(national statistic), in reality 1 in approx 22 ‘owned’ homes has received a NOD - AND THAT’s ONLY SO FAR!!!!!!!
WOW, WOW, WOW………………
“‘Builders are going to bring on new subdivisions,’ he said. ‘It’s going to be a continuing thing.’”
So why don’t the cities stop issuing building permits until the backlog of empty houses fills up in few years ?
there was a story in northern California.. a crooked legislator who took a bribe and got caught.
Only one thing stuck in my mind about the years-old story.. the amount of the bribe was $19,000 while the deal was worth millions to a developer..
They are not just ho’s, they are cheap ho’s.
p.s. Guv,
I usually add 25% to numbers from government officials, when they are not going in your favor…
So, is it really closer to 60% empty?
“‘Foreclosures are putting downward pressure on home prices,’ Gibbons said. ‘In Southern Nevada, home inventory is at historic levels and 46 percent of those homes are empty. That is negatively impacting home values. For every one percent decline in housing prices, that costs single-family residential property owners $800 million.’”
“He believes a housing recession has been prolonged and no foreseeable end at this time. The asset bubble has burst.’”
“The biggest problem of a lingering housing recession, he said is that it was the housing boom that really fueled growth for several years in Arizona.”
“‘Housing accounted for 25 percent of all new jobs in Arizona,’ Vest said.
- Mr Vest believes ‘housing recession has been prolonged’ … this guy has been living on the planet denial.
Well, he has, but if you read the article, it’s clear he can see the lay of the land now.
Nice choice of words describing the situation — lay of the land. The builders are getting buried in it!
imo, not enough has been said about residual job losses, which could end up being the truely crushing blow to local economies and their quality of life.
kinda like the coyote that falls off the cliff and splats on the desert floor .. bad enough.. but then he looks up with one eye and sees the huge boulder of job loss that followed him down.
“‘Michael Krein, president of the National REO Brokers Association, handles foreclosures in Las Vegas. Krein said he believes in letting the market readjust on its own without a bailout. Most of the foreclosures he handles involves speculators and the homeowners who got hurt are adults who should have known better.”
“‘If you bail out the market with cheap financing, prices stay artificially high,’ Krein said. ‘Just let the market readjust and people will be able to afford a home again.’”
Applause……..
Just desserts for delusional desert denizens…
They aren’t making anymore parched desert, you know.
“Newman said there are many landowners who have speculated and questions how long they can hold out given their carrying costs. He said he’s seen land off the Las Vegas Beltway that is priced at $1.3 million an acre and there is no use that would support that.”
“Douglas Crook”
He would probably do better if he changed his name, IMHO!
BAHAHAHHAHA:
http://www.youtube.com/jp.swf?video_id=ho_m6sVBGsM&eurl=http%3A//people.bakersfield.com/home/Blog/janay11/15314&iurl=http%3A//img.youtube.com/vi/ho_m6sVBGsM/default.jpg&t=OEgsToPDskIYNnxfxYoTg5wJ8ITOAkWU
Isn’t that the same dudett who stood up for Britney?
http://disembedded.wordpress.com/2007/09/14/leave-britney-alone-chris-crockers-pathetic-youtube-performance-art/
I think so - LOL!!
“Renting out a home also has financial implications. Homeowners often won’t be able to command a high enough rent to cover the entire monthly mortgage payment, Norton said. A recent client of Norton’s had a roughly $2,400 mortgage payment but could only get $1,450 in rent.”
Good luck there with Plan B, renting it out. I wonder how long it took her to figure out it wasn’t going to rent for her wishing price. How much money you get is determined by a total of 12 months rent, not the monthly amount.
If housing was bubbly priced, why should rent be covering mortgage.
The loans left the barn, long ago…
“The end is near for so-called stated-income mortgage loans in Nevada because of a consumer protection law enacted earlier this year, some mortgage lenders say. Assembly Bill 440, sponsored by Assemblyman Marcus Conklin, contains a provision that makes stated-income loans a crime, according to some legal interpretations.”
The sad fact about Vegas, is they’ll throw you in jail if you cheat on a casino, but every other felony is not nearly important in the scheme of things…
“Given the possibility of jail time, ‘nobody is going to do that,’ said Brock Davis, president of the Southern Nevada Chapter of the Mortgage Bankers Association. ‘The risk is too big.’”
“Homes in Shea’s Cabrillo Canyon will range in size from 1,501 to 2,470 square feet with prices starting from the $130,000’s. The houses are one- and two-story with three to four bedrooms and two to three bathrooms.”
Ok. Now we’re getting somewhere. Starter homes of 1500 square feet at $130,000. I had in 1990 a starter home of $96,000 to $97,000 and it was around 1500 square feet. It was in Ridgecrest, CA, way out in the boondocks.
Back in 2002 a consultant friend of mine was mentioning you could get a house built with 2 by 6 construction in Arizona City for around $100,000, including lot. I think reasonable prices like that will return, however gas prices will no doubt go above $100 per gallon at that time
- Got a Prious?
For consultants who love Arizona, AZ city would be a good move if you can do per diem gigs alternating between Tucson and Phoenix.
I think these place are out there a bit, so finding a job that can cover the loan might be a problem. There’s a reason land was cheap in Arizona.
I don’t know whether I am sad or happy about the slow pace at which this ocean liner is going down. Realtors scurry past smiling and pleasant handing out good cheese and crackers. They pause to dust and rearrange deck chairs. Builders, lenders and investors blithely fiddle along in their belief that a loss is not a loss until it is realized. The ship continues to take on water but no one panics. The passengers do not know there is a problem until they are treading icy water asking “what happened to the boat”. All the salesmanship made this a most pleasant sinking. This is beginning to look like one of the most pleasant recessions in history.
I lived in Ridgecrest for a year - 75. I remember going to look at big split wing 3 bd/2 bath that were going for $55K. It was kind of a kick to live there at that time. Moved there from westside of LA and it was definitely culture shock, but I like being out of but close to the city. I hear it’s much bigger there now.
Gas will be rationed before it gets to $100/gallon at a fixed price for X-gallons. May be coming sooner than a lot of people think…not due to peak oil…but due to peak exports + crashing dollar. Many of these places way out won’t be worth anything, except as farm worker housing, supporting local mining or other rural operation, or telecommuters.
Oh, and there are not enough rare metals to build solar powered houses or electric cars for most of the people…likely only to be a luxury for the wealthy and maybe the cash rich upper middle class.
In a gas crunch that looks like it would last a long time, I fully expect Priuses to command more than $100K, especially plug-ins.
I hate it when economists sugar coat the situation.
“‘The economy is losing momentum,’ he said. ‘Business confidence is plunging, housing is still in a recession – and could be for a while still – and the labor market is deteriorating.’”
“Vest released the latest Business Leaders Confidence Index, showing it fell 8 points. The index, released at the start of each quarter, measures business leaders’ expectations for the next three months. Taken by components, business leaders, both in Tucson and statewide are not optimistic in any one of six categories.”
“He believes a housing recession has been prolonged and no foreseeable end at this time. ‘We had just an inventory problem with housing before,’ Vest said. ‘Now with the credit crunch we have an even bigger problem in housing that will take longer to turn around. The asset bubble has burst.’”
“The price of land is so high that some developers in Southern Nevada said they are finding better opportunities right now in California. That was one of the surprising revelations in a recent forum on mixed-use development.”
“‘There is a lot of land out there, but it is way too expensive,’ said Michael Newman, senior VP with the Trammell Crow Co. in Las Vegas. ‘Unless, we see some adjustment here, I have grave concerns.’”
Raw land is still grotesquely overpriced in all bubble markets. I’ve seen, in a few cases, parcels selling for 10X what they garnered 5 years ago. If that doesn’t raise a few eyebrows, I’m not sure what would. This is in Western WA. Land needs to come WAY down in price.
Raw land in the bubble markets is priced by speculators at what houses should be priced at. I was just checking around Sante Fe, Tucson, Carson City - 200K for .5 acres or less is beyond ridiculous.
“‘Anyone have a joke?’ Vest asked a second time.”
Yep………
Real estate prices always goes up……..bwhahahaha
Buy now or get priced out forever.
‘Does anyone know a good joke? We need to lighten things up a bit.’ No one offered, so Vest continued.”
housing is still in a recession – and could be for a while still
BaHahahahahahahahaahahahahahahaha!
“‘Anyone have ‘another’ joke?’ Vest asked a second time.”
Your fired!
Bahahahahahahahahahahahahahahaa!
MyDumbJoke.com services available for Real estate meetings, etc thru 2011 at 555-1212
Help me ladies and gents - I still don’t get the “overpriced” “underpriced” idea. When someone paid top dollar in say 05, that was the going rate of homes at that time. Granted, most of us wouldn’t pay that much for a home, but that was the price. Prices are changing (not fast enough for my taste) and those are the new prices. Just like computers that are now cheaper - it doesn’t mean that someone “overpaid” when they used to be more expensive. Price does not equal value, I think. Real Estates like a lot of other commodities is only worth what one will pay when the buyer wants to sell. What am I missing here?
Historically prices are correlated with rents, but not in a bubble.
Well people were paying almost $1000/share for JDSU in early 2000, currently under $15. But I guess it was worth $1000 back then right?
That’s my question - difference between price and value. JDSU might not have been worth $1k/share in 2000, but that was the price.
And Enron got to 70 + I believe. Ya, that’s what people paid, but they generally bot it with cash, so the loss is contained. Housing is very leveraged and generally somewhat illiquid, that is why paying too much in 2005 does matter. A lot.
The fact that the US and much of the Western developed world based value assumptions and lending standards on these (inflated) values and their subsequent collapse and tightening respectively have a great influence on today’s prices and market and those in the future.
With regard to “Stated Income” loans, from an underwriting standpoint there is absolutely no justification for a banker to accept a so-called “Liar’s Loan”. All who apply for a mortgage loan state their income on the application. It is up to the lender to verify the validity of the stated income, not to just accept at face value whatever income the applicant states. Responsible underwriting demands that an applicant has sufficient income, from whatever source, to service his mortgage obligation. Of course some income is difficult to verify, such as tip income, but the effort to verify such income must be made. There’s absolutely no justification from a lender’s standpoint to ignore the applicant’s ability to repay. Why would one want to make a loan that has limited prospects for repayment?
One wonders though, when the going gets tough, just where do the cuts start. A builder has to make a profit to survice, or at least break even. If the prices can’t be demanded, then somewhere else will be cut in order to reduce the prices. Mattamy Homes sold a house that had no electrical power and the furnace was wired illegally (code) to the house next door. A Town of Oakville inspector passed this as well. In addition to this, Mattamy began construction on land that had been recently fertilized with bio-solids (human waste) without waiting the required time. An unsafe practice!! I believe both of these incidents should concern potential buyers and I certainly recommend that a home inspector be hired to monitor any new home construction by any builder. At least with a building inspector you hired, your interests will be in the forefront and any cuts to quality, etc will be caught up front. If so, get a lawyer involved at the beginning.