Sunday, April 17, 2011

NEW HOUSE STARTS TAKE A NASTY TURN

The numbers report for the home-building industry couldn't have been more grim in February: New-home construction in the U.S. fell to a pace that would translate to about 250,000 homes for all of 2011, which would be the fewest built since the Commerce Department began keeping track in 1963.

If home building isn't dead, there's certainly time to think about what it would look like when it revives, perhaps from 2013 to 2015.

It's not dead, but it depends on where you are in this country. There are very, very few subdivisions being started, because, by and large, there's no financing for land development. Prices have come down, but it's pretty hard for developers to go out and borrow to buy land.

Some developers are taking new approaches to building out their existing communities. They're selling sections of land to builders in smaller chunks. Instead of saying, "Why don't you take 500 lots?" as they once did, they're saying, "Take 50 lots and target them for one particular market, such as empty-nesters."
The median size of new homes already is steady or dropping. Smaller lots already have become acceptable because people don't have time to take care of them.

With younger adults who may be buying in a few years, longer-term, this generation isn't going to be able to afford bigger, bigger, bigger. Financial conservatism is replacing the go-for-broke house. These buyers will be willing to trade the over-the-top features that used to be put in just for resale value in exchange for flexible, open spaces that are energy-efficient. And they do want to be able to work at home, with wired and wireless connectivity.

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