Tuesday, October 18, 2011


When asked who their competitors are in today's housing markets, a lot of new home builders are saying "foreclosures."  In some areas, Realtors are loading up buses and limos with speculators and driving them to up to the doors of bank-owned foreclosed homes in the area.  This has proven successful for the Realtors and the banks but dried up a lot of new construction that these speculators used to buy.

Now there is a little bit of sunshine for new home builders.  Bus tours are less frequent than before and offers are fewer even though there are just as many speculators as before.  The reason is that what is available on the foreclosed market is either priced too high for a profitable flip or the houses are in such shambles that it isn't cost effective to remodel them and flip.

With interest rates at near all time lows, a few developers are again starting to look at building multi-family projects and offering them to speculators.  That is good news for the modular factories that usually sell these directly to the developers which keeps the factory running, keeps the factory staffed and open.  It also takes the pressure off their authorized builders to keep the factory open.  That's the little bit of sunshine.

But, and there's always a but with banks, foreclosures that had been put on hold because of the problems with the paperwork that forced the banks to take a second look at delinquent loans are now  back on the fast track.  Banks are looking at replenishing their supply of foreclosed homes.

Think of the bank as a grocer.  They open a case of lettuce, put it on display and sell every head except three.  These heads were brown and looking old.  So what does the grocer/banker do?  They open a fresh case of lettuce and put the old heads on a close-out table or simply throw them away.  Banks can't throw away the stall, old houses in their portfolio but they can bulldoze them when the land they set on is more valuable than the house and land.

Here then is an opportunity for the new home builder.  Empty lots right in the middle of existing neighborhoods.  Some still have the houses on them but the price of the land makes these lots very desirable. These are truly scattered lots and some will never be worth the investment but then again, isn't finding just one or two lots that a builder can locate and build a house on for someone better than no sales at all?  It will take a lot of searching but they're out there.  Good Luck.

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