News

2015 has been filled with stories about how housing starts have missed the mark.

Fingers have pointed to shortage of lots, shortage of labor and even high construction cost. According to John Burns Real Estate Consulting, the answer might be simpler than we think. A research note published last week illustrated that many markets in California now have median new home prices above GSE conforming loan limits, making obtaining financing harder for new home buyers. As a result, over half of new home buyers need jumbo mortgages which are significantly more difficult to qualify for and require higher downpayments, all of which stifle demand, leading to lower starts. Orange County is a perfect example as new home sales have slowed for 10 straight months while sales of existing homes have surged. On average, new homes cost $250,000 more than existing homes in OC.

By Tom Farrell, Director of Business Development