The economic crisis has resulted in home builders losing more than 70 percent of their business. Over the past few years, the American housing market has suffered the most severe downfall since the Great Depression of the 1930s. The housing decline affected both investors who could no longer buy and sell houses for a quick profit, but also families who couldn’t afford to pay their mortgages anymore. This resulted in a lot of people losing their homes, and banks losing money. Families couldn’t afford mortgage payments anymore, or simply chose to walk away from their mortgage because their home was now worth much less than the mortgage value. As a result, the market was flooded with low priced houses, which caused the growth of new home building to slow down a lot, putting many home builders out of business.
Demand for New Homes
Across the United States, the number of houses for sale is at its lowest since 1999. This is due to the fact that new construction has been very slow for the past few years, and investors have bought many of the foreclosed homes. The steady job growth that the United States is experiencing lately resulted in more families looking for a home, many of them looking for new constructions.
Often owners who put their homes up for sale receive a few offers within a couple of days after the listing, so many people decide to not list their home yet, because they fear it will be sold before they even have a chance to buy a new one. This all contributes to the rise in demand for new houses.
The Slow Home Building Industry
The increase in demand for new houses is, for many builders, the sign that it is time to get back to work. Unfortunately, most home builders are not yet ready to start work again.
Many workers have left their construction jobs and started working in other industries. Because the housing market just recently started recovering, it is hard to bring the workers back and offer them a good salary. As a result, the time needed, as well as the cost of building a new house, has increased.
The most affected home builders are the ones in areas of the United States that were hit the hardest by foreclosures. A lot of distressed properties are still available on the market in those areas, which makes the demand for new homes lower than in other parts of the country.
Another problem that the home building industry faces is that small home builders, who far outnumber large public home builders, will find it hard to recover after years of low demand. Unlike large developers, they will have to borrow money in order to buy a developed lot, which puts them at a large disadvantage. Fortunately, job growth has created significant demand for new homes from people who want to live close to their work place. This would be a great niche for small builders, because big developers will regard it as not profitable enough, and prefer to build more homes at a time elsewhere.
While the demand for new houses has not yet been met by the home building industry, we must keep in mind that the housing market was hit very hard by the economic recession. It will be a while until builders fully recover, but improvements can already be seen and, hopefully, the buyers’ demand for new houses will be met in the near future.