We reported last month limping new home sales stats and despite the multifamily sector experiencing the highest levels of optimism since 2006, this month marks a dark moment in new home construction’s history as February’s housing start numbers experienced their biggest decline since 1984 (when Cyndi Lauper hit us with Time After Time) and approved building permits are at their lowest level ever. EVER!
For the industry cheerleaders saying the recovery has started, tell that to the builders who not only had the rug pulled out from underneath but their kneecaps broken as they fell to the floor. Housing starts dropped 23% in February which barely beats April 2009’s record low.
Even economists that have been predicting a slow spring for builders are stunned. Building permits fell 20% to a record low and the National Association of Builders keeps up the monotonous finger pointing at construction lending as they have for years (despite loans being made on the continually high inventory levels).
Foreclosures remain the biggest threat to builders who in previous years were the kids on the block that could wheel and deal. The good news lies in the investment sector- if your clients are looking to invest, home builders are in a position to bargain. Oh, and if you go into a national builder who says they’re already offering all they can (free blinds and 1 point toward closing) and that they’re doing well, print out this article and hand it to them to see if the onsite knew the historical milestones hit last month.
Joe Manausa
March 17, 2011 at 5:58 am
“Foreclosures remain the biggest threat to builders who in previous years were the kids on the block that could wheel and deal” This is exactly right Lani, the over-building during the boom years has created a glut. Instead of a new-home market, we’re in a recycle market where foreclosures and shadow inventory are replacing home builders.
Jeff Brown
March 17, 2011 at 12:20 pm
This has been interesting, and a bit confusing to watch in real time. The numbers don’t lie. Yet, in two hugely popular markets in Texas, Austin and the Dallas/Fort Worth MetroPlex, the relatively cheap, well located land zoned for residential/residential income is officially gone. It’s all been spoken for, and much of it recently. It appears possible that the early spring of ’12 might bring those markets a new supply — and one that’ll be sold surprisingly quickly. Don’t misunderstand though — those two areas aren’t comparable to most of the rest of the country.
It’ll be fun watching this unfold. I’d watch for permits to begin sprouting late this year, though weather patterns there may put it into the first quarter of ’12.