Tight mortgage lending leads to lost sales

Tight mortgage lending standards have led to thousands of lost new-home sales as the housing market tries to rebound after a rough start to the year, a new survey showed on Thursday.

The National Association of Home Builders (NAHB) said 83 percent of builders lost sales over the past six months because buyers failed to qualify for a mortgage.

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All told, the average share of sales lost was 9.7 percent, translating into 18,700 lost sales.

"While housing has seen some positive growth throughout the year, there is no denying that tight credit conditions are hindering a full, healthy housing recovery," said David Crowe, the NAHB's chief economist.

"These persistently tight mortgage credit standards continue to limit the number of creditworthy borrowers, particularly younger families and first-time home buyers, from entering the housing market," he said. 

More than half of the single-family builders said that lending is "tight" or "very tight," while only 11 percent indicated they were "somewhat easy."

No builders described them as "very easy."

Tight lending is one problem as builders face rising costs for building materials and shortages of finished lots and labor.

"NAHB advocates for prudent lending standards, but we've seen banks and regulators swing the pendulum too far and create an environment where lending standards are too restrictive," said Kevin Kelly, NAHB chairman and a homebuilder and developer from Wilmington, Del. 

The NAHB has supported a slew of ideas to overhaul the housing finance system including better credit scoring, a reduction of guarantee fees and congressional passage of a bill sponsored by the leaders of the Senate Banking Committee.