REAL ESTATE

Builders and developers are fueling a rise in home sales

Builders are jumping through hoops to make it easier for prospects to buy a new home. Some are paying closing costs of up to $5,000. Some have used help from government programs.

In January, sales of new homes were up 28.9 percent from a year earlier. One couple said when they moved to another city, they first thought they would buy an existing home. They found that few acceptable homes were on the market, and those that were available were snapped up by investors who were willing to pay more than the asking price.

Though their credit score wasn't great because of a 2008 bankruptcy, the builder helped them be approved for a home that cost more than they wanted to pay. But it was a wonderful, spacious home.

What caused the shortage?

Though every community in the United States is different from others, there are three factors responsible for the shortage of existing homes for sale:

• First, some homeowners are waiting for home prices to rise further. Last year, home sales prices rose an average of about 8 percent from the year earlier. If sellers can wait three or four years, their asking price could be higher. Though, during that time, their needs or wants in a home will not be met.
  
  
• Second, homeowners who bought homes at 2006 prices have to build more equity before listing them.
  
  
• Third, some bank owned homes are not yet on the market. Just as homeowners are waiting for prices to rise, so are some banks.
  

The National Association of Realtors reports that the number of existing homes for sale fell to 1.74 million in January, the lowest number since the year 2000. Right now, it's a buyer's market. Though fewer homes are for sale, those that are will come at bargain prices. It pays to ask your real estate agent to tip you off about a great home that's just come on the market. That home will go fast. Be prepared with a preapproval amount from a lender so you can make a qualified bid.

Why are 'short sales' allowed? Doesn't that hurt the economy?

Right now, it doesn't.

People who bought homes at the height of the real estate bubble, then had their interest rates raised, may be facing foreclosure. That's especially true if they had a personal disaster at the same time, like a job loss or a divorce.

Some of them have been able to arrange a short sale, selling the house for something less than the mortgage amount. The lender typically eats the difference. That sounds bad for the banking industry, but the bank involved will lose much less money than if they were forced to foreclose. Figures for December show that short sales cost a bank 24 percent less than a comparable house that was sold in foreclosure which resulted in a 64 percent discount from the appraised value when it was sold.

From an economic view, everyone is better off with a short sale. Bankers and investors see fewer losses, homeowners have less damage to their credit ratings, and neighbors' houses are less likely to lose value because of the higher sales prices and the reduced vacancy times.

A short sale does go faster, in part because the home is in better condition. Usually, the homeowner is living there, taking care of it and preventing vandalism. Economists at CoreLogic say that in short sales ownership changes hands quickly which is a good thing for the economy and society.

In the past, this type of sale was rare. They are becoming common as real estate agents and lenders have become more experienced at pricing and marketing them. Late last year short sales accounted for 10.4 percent of sales.

The shift is helping the housing market with its backlog of distressed mortgages, and it's reducing the number of properties that are standing empty. Short sales have helped to keep home prices stable and rising.

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