With mortgage rates continuing to climb and housing markets losing value more and more people are losing their homes. This is adding an even larger number of homes on the market to go along with anemic numbers of buyers out there. U.S. homebuilders are stuck in a rut as builders are not very confident in creating new neighborhoods, especially with the large number of homes on the market. There is an oversupply of homes and potential buyers have not been fazed by a wave of incentives by sellers trying to attract them. This is leading to many price cuts in different markets.
Builders are facing increased cancellations of sales contracts and large inventories of unsold homes to add to their grief. Builders are remaining cautious.
The hardest hit areas with mortgage delinquencies are those in the midwest states of Michigan, Ohio and Indiana. These delinquencies are correlated with poor economies and general real estate malaise. The situation around the country could still get worse. Today, home equity when compared with home value, is very low. This was caused by the huge run-up of home prices during last year’s housing boom.
Many homeowners are feeling the pinch as they have borrowed against their home’s equity and when the home prices fall they could be on the losing end. Many of these people may just walk away from the contract and go to default. Of course this is great news for a buyer.