Bank Repo Houses

NHB says housing demand hit due to high prices, rates

Demand for housing has been hit mainly due to high real estate prices and hardening interest rates, said RV Verma, chairman and managing director, National Housing Bank, Thursday.

"Inventories are building up due to this slowdown in demand for houses," RV Verma told reporters on the sideline of a banking summit here.

Verma also said that National Housing Bank has revised upwards the ceiling of capital requirements for new entrants (housing finance companies), who want to register under NHB, to Rs 10 crore from Rs 2 crore. NHB currently has 65 registered companies.

Despite this slowdown, Verma said National Housing Bank expects to make the highest ever loan disbursal estimated at Rs 12,000 crore in the July-June 2011-12 period, as against Rs 8,500 crore during the same period last year.

The regulator for housing finance companies has revised its refinance rate, which is linked to its prime lending rate, to 10.5% from 10.25%. However despite Reserve Bank of India (RBI) hiking key policy rates last month, National Housing Bank has no immediate plans to revise its lending rates unless the central bank hikes policy rates significantly, Verma said.

Any further rate tightening in policy rates by the RBI would hurt housing demand significantly, he added.

RBI had since 2010 raised repo and reverse repo rates nine times to 7.25% and 6.25%, respectively, to control high inflation mainly due to high fuel and commodity prices. Repo is the rate at which banks borrow money from RBI. Reverse repo is the rate at which banks lend to RBI.

On rural housing, Verma said that the bankers' committee has submitted its recommended to the ministry of rural housing in which it has envisaged schemes on rural housing both for below and above poverty line people.

Foreclosures and Bank Repo Homes Still Weighing Down Home Prices ...

The huge amount of foreclosures and bank repo homes in the U.S. housing market continues to weigh down residential prices in various key metros. The latest Standard & Poor's/Case-Shiller price index report showed that several cities recorded their lowest price levels since the spring of 2009. Analysts observed that the recent drops in prices showed that the residential market is still far from a recovery.

Repossessed homes in Southfield and foreclosures in Denver and in other key areas of Michigan continue to increase, leading to further decreases in housing prices. Among the 20 cities tracked by S&P, Denver was one of the areas where house prices dipped below levels seen in 2000. Denver was joined in this category by Las Vegas, Cleveland and Atlanta.

The continuous slump in housing prices in the metro area was largely blamed on the oversupply of Michigan repossessed homes and foreclosed properties in the region. However, Denver had the best performance when it comes to month-over-month price comparison. It was the only city among the 20 focused on in the report that posted a price gain in February when compared with January 2011, with housing prices improving by 1% between the two months.

Denver was not the only big city market whose year-over-year prices got hammered by foreclosures and bank repo homes though, as 10 other cities reached their lowest price levels in February 2011 since April 2009 when prices all around the country reached their lowest points. These cities include Atlanta, Charlotte, Chicago, Las Vegas, Tampa, Portland, Seattle, Phoenix, New York and Miami. When figures for the 20 cities were combined, February 2011 prices showed a drop of 3.3% compared with February of last year, while the decline from January of this year was 1.1%.

According to housing market experts, the oversupply of house repossession properties and cheap foreclosed dwellings is the primary reason behind the continuous slump in residential prices. They also stated that demand for residential properties have been weak in the past few months as majority of Americans find homeownership an unattractive concept. Others are just waiting for prices to decline further, hence their decision to stay away from the home buying market.

With bank repo homes and distressed properties expected to rise further before 2011 ends, market experts predict that prices will continue to tumble, with some areas considered more vulnerable than others. According to them, cities with high unemployment levels and huge amounts of distressed homes will likely record the biggest price declines in the coming months.

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