It's Not as Simple as Just Starting to Build Again

There are encouraging signs in many markets that home sales are increasing and more people are putting their homes on the market at salable prices. As unsold new home inventory that still exists in some markets is being absorbed, people have a choice on a new residence between an existing home or new construction. In some markets there are very few unsold new homes, so a move-up in an existing home or a contract for a custom home are the probable scenarios.

Regardless, for new construction to get to where it was - not at the boom levels but just at a sustaining pace - a few issues that might not be apparent to the general public or even some real estate professional need to be resolved.

(1) Building companies have scaled back so rehiring or new hires will need to occur.

(2) Floor plans, features, options, specifications, sizes, pricing and other factors dealing with the actual product will need to be evaluated and perhaps adjusted for a different sales climate.

(3) Subcontractors and trades have scaled back. Some may have gone out of business. These vendor relationships will need to be reestablished or created.

(4) Sales teams have been scaled back or eliminated. Hiring and training of new on-site personnel will need to occur.

(5) Building departments have scaled back so there may be delays in processing permits and conducting inspections.

(6) There have been very few applications for plats, rezoning or subdivision approvals, and this will take time and new employees to get back to full speed.

(7) Land prices will need to be slashed substantially or there will be no more large scale building. Some builders may still control properties. Others will need to try to revive the interest they previously had or go out and look for more land. Land is plentiful, but I'm still seeing boomtime prices. Someone needs to wake up the property owners. Otherwise we won't see many new homes built in markets where that's the case.

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