Monday, June 30, 2008
Housing Industry Ups and Downs
The last week of April a bubble formed. Many industry insiders hoped the bubble would hold, but in the end, it burst.
During the last week of April, and the first couple weeks of May in an attempt to prepare to close out all projects by the end of the year, builders began trenching a number of properties. As the projects began, surprisingly, many of them were bought by potential homeowners before the wheel even broke into the ground. This created hope that perhaps, just perhaps, the bubble would expand, and building would continue as the builders realized that buyers were ready to start buying again (though hardly at the pace of a couple years ago).
By the end of the second week in May, the buying slowed, and builders speculated that the continuance of building would not create profit as some had hoped . . . so the creation of new construction stopped.
This is not to say that new housing is at a complete stand-still. Multi-unit projects are slowly increasing, though at a careful pace due to the insurance company's dislike of such projects because it is these kind of housing developments that lawyers use for class-action suits against the construction industry. Military housing is on the rise. The government is taking advantage of a work-hungry housing industry, and the lower bids during the slowdown. And, commercial building is doing okay, though nothing to get excited about. All of these neighborhoods that rose during the housing boom are now in need of services, and commercial builders are happy to oblige.
So what is in store for the rest of the days of summer?
Unfortunately, this will continue to be a slow year for housing, as much as industry participants are hoping for a rise. Smaller companies are closing their doors. Larger companies are having trouble maintaining their immense overhead. This will be the year of the mid-size construction companies.
I have never thought that we will return to the boom that was, but in a self-adjusting economy, if the feds will leave it all alone, the housing industry will rise again - - - IF the government leaves well enough alone and allows the economy to adjust naturally.