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Financing Prospects for Santa Barbara New Homes


Newly built homes may make up a relatively small part of our overall housing market, yet I think Santa Barbara and Montecito homeowners have to be encouraged by the trends we are seeing.  This August, the National Association of Homebuilders reported that construction spending has turned up (“A Housing Recovery is Gathering Steam”) after its long slide. In August, the Commerce Department reported that overall sales have jumped 25% over the past twelve months. So far, so good.

Yet it’s still true that many observers (I’m one) think that these encouraging numbers would be a lot better if it were easier to finance home purchases…particularly for previously occupied homes. New homes have an advantage right now in this department. At a time when obtaining financing can be a stumbling block, there are several reasons why lenders may gravitate toward financing Santa Barbara new homes.

Part of the momentum has to do with recent history. One of the main reasons for the rise in newly built home sales since 2010 has been the number of foreclosures on new homes. Many of these were built on spec, never lived in, then turned over to lenders when the original investors could no longer afford to support them. Since foreclosed homes are usually cheaper than normal sales, that lower price made it easier to gain financing approval.  Added to these is the number of non-distressed new homes whose financing is available directly through the builder.

Other factors make new homes simply easier to finance. From the lender’s point of view, new homes look like a slam dunk when it comes to safety and compliance issues: if they are on the market, they’ve passed the test. New homes in the Santa Barbara area are usually more energy-efficient -- plus, they have been constructed with today’s buyers’ preferences in mind.  No home should ever be purchased without standard inspections, but new homes can often avoid some additional inspections that might be ordered for older homes.  Too, Santa Barbara new homes bypass heirloom health concerns like lead and asbestos – trimming loan-processing complexity.

Lenders as well as buyers of new homes can plan on less capital being required downstream, after the purchase, to keep properties in top shape. That smaller maintenance load makes it easier for the new owners to meet their mortgage requirements, which translates into lowered risk for lenders. More immediately, if a previously owned home is in need of major repairs – that cost can postpone or derail a loan closing.

In case you have been thinking of buying or selling a Santa Barbara property, give us a call.

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