All across America this morning, people will be grabbing their morning paper (online most likely) and reading an article that was circulated through the Associated Press about the new home construction industry. As a matter of fact, the article features a picture of a home being built in Tallahassee (and that is how this feed caught my attention).
Unfortunately, the article is grossly misleading. The authors of this article apparently do not consider “supply and demand” in real estate to be a factor that home builders should consider when deciding what to do.
In the real estate equation, the supply side is filled by:
- New home builders building homes
- Existing home owners selling their home
- Banks and asset managers liquidating their inventory
On the other side of the real estate equation, the demand side, is filled by the growing need for new homes from:
- Home buyers
- Home renters (this is also where we would see home investors)
Glut Of Homes Force Smart Home Builders To Wait
The fact is, there is a glut of homes on the market that is forcing wise home builders to wait for the real estate market to need more houses. The Associated Press article leads us to believe that this is a “shocking new development.”
Construction of homes unexpectedly plunged last month to its lowest point since April, the Commerce Department said Wednesday. The weak figures show that builders still lack confidence that buyers can soak up the glut of unsold homes already on the market — a supply magnified by a record number of home foreclosures.
The real estate market’s glut of homes is not a big surprise. All a home builder has to do is track the inventory of homes on the market and then make a decision on where the entry point will be for his (or her) construction company.
So, how and when does a home builder choose an entry point to start building? [click to see the real market information that home builders rely upon]
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