New Home Construction awakening from Coma – Will have a twisted path to Recovery

Here in Middle Tennessee, there’s a lot of new construction happening.

It seems that anywhere I go in town I see “In-fill” construction and new residential and commercial developments (large and small) popping up.

By the look of it, you’d think we’re in FULL RECOVERY.

The good news is that things are moving and improving, but don’t be too quick about assuming full recovery . . . We have some growing pains to deal with.

After an injury or illness, we humans almost always need some level of “Therapy” for recovery. We can’t hop off the operating table and swing right into full range of motion and activity. We’ve gotta be careful and allow for recovery.

No different in the building industry . . . and there are profound effects on the Real Estate sales Industry that merit noting for Home Buyers and Sellers.

At a recent Executive Leadership Breakfast, I met an executive with a National Building Products Company and commented immediately that his company must be VERY happy with all of this new construction happening all over the place. He said that they ARE very happy but that they have a long (painful) way to go before they can even use the word “recovery.”

Why?

Wouldn’t you think that lots of new construction would be a windfall for these folks?

Here are the issues:

  • When the economy tanked, the demand for building supplies stopped VERY suddenly . . . and they literally had to shut down a majority of their production – Which means that to meet new demand for product, they’ve gotta spool these manufacturing assets back up and that takes time . . . and because of the uncertainty of the economy, they’re hesitant to spool up too quickly lest they be burned . . . again.
  • While Middle Tennessee is cranking back up, not all areas of the country are cranking up . . . In fact, the cities that were the largest customers for building products pre-crash have not come on-line with much demand . . . and when they do (if it’s sudden), the suppliers will be overwhelmed and will not be able to create enough materials to keep up with the demand.
  • Costs are RISING QUICKLY because of this perfect storm of high demand and limited manufacturing capacity/ability.

So . . . What this means to our Home Buyers and sellers in Middle Tennessee is that new construction housing will continue to get more and more expensive . . . it’s VERY volatile . . . and the banks still aren’t all that excited about lending for “Speculative Construction.”

This is somewhat of a “Catch 22” . . . New Home Buyer demand is strong but builders are not able to start enough houses to keep up with this demand both because they aren’t able to find sufficient bank financing and because pricing and supply of building materials is in such flux.

For re-sale Home Sellers, this is all GOOD NEWS because the new construction popping up around them is actually beginning to necessarily inflate to higher pricing per square foot and has limited availability.

This dance (saga) will continue to play out for the next year or so . . . In the meantime, I encourage ANYONE considering selling an existing house to get the process rolling.

Here in Middle Tennessee in most price ranges, we are facing a real drought of new listings . . . WE NEED MORE INVENTORY!

and until something significant happens in the building supply end of things, the builders will not be able to supply this inventory.

If you’re even contemplating selling your house, NOW is the time to meet with a REALTOR to explore your options in this market.

I and the Vital Few Real Estate Sales Specialists of Pareto Realty stand poised and ready to serve.

Published by Barry Owen

Strategist-CEO of Pareto Realty Real estate sales Professional Inviter-Facilitator-Practicer of Open Space Technology Opening safe space for people & organizations to self-organize around issues & opportunities BarryOwen.US Invite-Listen-Love

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