Lots Of Lookers, But Not Many Home Buyers

One intriguing indicator of the strength and direction of the housing market is the traffic-to-sales ratios chalked up by builders who sell by putting up new model homes-that is, the percentage of lookers that actually become buyers. Based on a recent survey of such builders of single-family detached homes, the National Association of Home Builders reports that the median number of lookers to buyers was about 20 to 1 in 1989 and 1990 but had risen to 30 to 1 by the second quarter of this year. In other words, far fewer potential buyers were able or willing to pony up the cash for an actual purchase.

That reluctance didn't apply equally to all homes, though. In 1989, the traffic-to-sales ratios of homes costing less than $100,000 and more than $250,000 were relatively close-20 to 1 and 23 to 1, respectively. By the spring of 1991, however, the lower-priced home ratio had risen to just 23 to 1, while it took 50 prospective buyers of high-end homes to produce a sale.

From 1989 to mid-1991, the traffic-to-sales ratio behaved differently regionally as well-staying relatively flat, at 20 to 1, in the Midwest and South, while doubling, to 50 to 1, in the West, and rising from 23 to 1 to 39 to 1 in the Northeast. In short, builders focusing on the South and Midwest and on producing lower-priced homes seem to have weathered recessionary storms the best.