Whenever there is any type of crisis in the housing market it is critical to take a step back to assess how the current crisis can affect housing in the future. Real estate markets are all driven by supply and demand and without inventory house prices can soar and buyers can be left without product to buy.
Most people may be wondering why I am worried about inventory at a time when buyers are sitting on the sidelines waiting for the Covid-19 crisis to pass. The reason I always worry about inventory is because it is what drives markets everywhere.
There are two very distinct challenges right now for the new construction industry. The first is that many builders and developers are on hold because their local government has not deemed them an essential service. While we could argue for a long time about that, as I disagree, the reality is that many projects that should have been built and put up for sale are now sitting dormant.
The second issue is the lending crisis that builders, developers, land purchasers are experiencing. Many lenders have put new construction loans and jumbo loans on hold. For many builders and developers this creates a monumental crisis as they sit holding the bag so to speak. They may have been right in the middle of building when their state put a hold on their ability to finish their product. For many they are left wondering how they will survive.
This all adds up to more challenges for our inventory. Any area that has seen double digit price increases is subject to another wave of increases if new construction doesn’t get back on track. New construction is the cornerstone of our real estate market and we need it to provide the balance of inventory required to manage population growth, migration growth, and area demand.
Wherever you practice real estate it is essential to closely monitor what is happening in your market’s new construction sector. Everything that gets out of balance will have a negative effect if not corrected. My personal hope is that lenders loosen up their purse strings and give our builders and developers the funding they need to finish their projects, as now is NOT the time to penalize them for something they had no control over.
By Denise Lones CSP, M.I.R.M., CDEI – The founding partner of The Lones Group, Denise Lones, brings nearly three decades of experience in the real estate industry. With agent/broker coaching, expertise in branding, lead generation, strategic marketing, business analysis, new home project planning, product development, Denise is nationally recognized as the source for all things real estate. With a passion for improvement, Denise has helped thousands of real estate agents, brokers, and managers build their business to unprecedented levels of success, while helping them maintain balance and quality of life.