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Earlier we talked about the earnings debacle at KB Home, which badly missed estimates thanks to a surge of orders that didn’t go through thanks to mortgage disapprovals.The company said that foot traffic and buyer optimism is clearly up, but there’s still a bottleneck at the mortgage level.
On the company’s conference call (via SeekingAlpha) CEO Tom Metzger said something else interesting:
In some of our submarkets, we are finding that homebuyers are no longer expecting home prices to decline further, which is creating some sense of urgency to buy now. Additionally, as rents continue to increase, prospective customers in many areas are now recognising that they can own a home for a monthly payment lower than their rent. It is now common for me to hear anecdotes regarding the customer who is visiting our sales office because their rent just increased.
Having said all this, there’s a great deal of media hype about the housing recovery taking off like a rocket. There’s no question that things are better, but we continue to maintain that it will take some time for markets to fully recover.
Metzger doesn’t square the circle to his original statement about mortgage cancellations, but this does raise the question: Has media hype been responsible for a surge in un-creditworthy would-be buyers showing up at place like KB Home, only to discover that they’re not nearly in good enough shape (job-wise or debt-wise) to actually get to the mortgage finish line.