Real estate is an industry of hyper-local interests, and few sectors of the market better demonstrate that than construction.
Though some builders are growing, and raising prices as a result, others are still pursuing incentives, such as price cuts, to lure in prospective homebuyers, and a recent Wall Street Journal piece analyzed some of the motivations for that divergence in behavior.
The key, wrote June Fletcher for the newspaper, is to understand that the market is still in the beginning stages of a recovery, and as such, builders will react differently to those changes in the market. Though some builders (mainly the larger, more financially-secure entities) were in a good position to weather the recessionary storm, others were “hammered,” in Fletcher’s words, by the dropping demand for all the excess homes that were built in the boom years.
Because of that, Fletcher recommended that buyers look at the annual reports and financial statements from the builders to better gauge how they have responded to the housing downturn.
Fletcher did remark, though, that price increases will become a hallmark of the housing recovery for two main reasons. First, home sizes are expected to increase, with Echo Boomers forming families, and as square footage rises, so does the cost of the home; second, manufacturers of products such as gypsum and roofing have announced steep price increases for 2012, and builders will almost definitely pass those costs on to prospective buyers.
Fletcher’s point, in the end, was a simple one – clients should buy now! Housing is stabilizing, and the record affordability seen in housing today could soon be a thing of the past.