The last round of figures for new home sales for 2011 are in – and there are no surprises. The data is ugly – and confirms what we are already aware of: that the housing market had a shocking year. The US census data on new home sales in 2011 also reminds us that builders are having a very, very hard time indeed. Before we go into a little bit of commentary, let’s look at the actual data that was released.
While builders had a slow uptrend to smile about towards the end of the year, this ended abruptly in December, with that month recording a 2.2% decline. This means that in terms of brand new single family houses being built – there are fewer than we thought. All in all, this makes 2011 the worst year in recorded history for new housing starts in the US (according to Bloomberg anyway).
What this data actually means for builders and real estate investors
For builders, this means that the marketplace is tougher than ever. So too for real estate investors – who find themselves increasingly competing with first home buyers for distressed properties such as short sales and foreclosures. This has traditionally been the domain of investors looking to buy cheap properties for financial gain, but as prices have fallen and the industry generally has taken a bit more of a tumble, we have noticed that there are more and more first home buyers in competition for those distressed properties.
This means less first home buyers engaging builders to build their new home from the ground up. For builders, this will probably mean one thing – they need to diversify their business. Instead of relying on new home starts, perhaps they need to take a look at the refurbishment and repair work which is available. This is in line with the fact that people are buying up more and more older houses, which will need a little attention here and there.
Real estate investors will also need to work harder for their money. Some may even go back and review their business plan to see what adjustments can be made to cater for the revised marketplace. While the slowdown in the real estate market means that it has become cheaper to buy an existing house, the chance for an appreciation in value is still some distance off according to some analysts. However the majority of people agree that 2012 real estate projections point towards a marked improvement in the industry. This will come as welcome relief – especially to those in the building and construction industry as they lick their wounds after a few extremely tough years.
Are you a builder, first home buyer or investor? Is the data in line with your own experiences? What’s your take on the year ahead?