The Housing Market

I just completed some fairly extensive research concerning the housing market and residential construction. To be specific recent history and the possible reasons for its collapse. The data I have found was easy to access and the conclusions just as easy to reach. Some of it fascinating, some examples:


1) In 1990 the total amount of all mortgages in the USA totaled $500 billion, by 2007 that amount ballooned ( no pun intended) to 2.7 trillion!

2) Home ownership in a few short years (early 90's) shot up from 63% where it had lingered for decades to near 70%!

3) New home starts grew 91% from 1995 to 2005!

4) Average home sales price jumped from $263,000.00 in 1995 to $307,000.00 in 2005 a 47% increase.

With the construction industry responsible for 3.5% of the total labor market and a major contributor to our GDP, the question should be asked: Why didn't anyone see the inevitable? The answer is, many did. Not many headed their warnings. To be fair, there are numerous speeches, press releases, statements made by the Federal Reserve, economists, and industry associations extolling the virtues of home ownership, new and larger homes and that housing is a great investment and economically solid.

While the residential construction industry is currently in a depressed economic situation, it is certainly not all doom and gloom. In fact builders now know what the consumer wants in new homes as survey after survey has been conducted in the last few years. Builders know the consumer is demanding, smaller homes, more "green" options,energy efficient homes and more affordable homes. The demand has switched from aesthetic to functional. The problem remains however, while there might be buyers there are no loans to be made, certainly not pre construction loans. In addition unemployment while officially at 9.5% ( arguably near 18% counting EVERYONE) and massive "under employment" builders and our economy are in a holding pattern ( construction has led our nation out of most every economic crisis since the great depression) and perhaps worse, poised for another fall, the classic double dip.

While most economists agree government intervention in business is bad for business, in this, the greatest economic crisis since the great depression is a case where the exception NEEDS to be the rule. Government and the industry need to work together, in the form of additional tax credits, for building energy efficient homes ( actually expired in NOV,09), tax credits for buying new EenergySatr rated homes, reduction on the local level of impact fees and many many more collaborative efforts form both sides of the political aisle.

Until the unemployment crisis eases and banks start making good loans again builders need to prepare for the eventual turnaround by investing in green products, offering smaller energy efficient homes, becoming EnergyStar rated, becoming" the expert" on green and energy efficient building and partnering with the suppliers in the same mode.

More to follow........