The slump in the Residential Construction industry is almost a year. Has it found bottom? Not if there is still air in the housing price. In many of the previously “hot” real estate market, it seems the housing prices still have room to settle. In my neck of the woods, the home builders are slashing prices left and right to make the inventory moving. Some of them that offered 1% referral commission a year ago, 3% six months ago, are offering 5% referral now. Scary, isn’t it?
New home prices usually come down faster than existing home prices, because home builders do not have the same attachment to new homes as homeowners to their existing homes. Existing home prices in my area did not buckle much yet. But sooner or later I believe they will, when many of the buyers who teased by low interest rates over-stretched themselves a year or two ago end their honeymoon with their adjustable rate interests-only home loans, and when it finally settles into people’s mind that home prices are not going to go up any time soon. Although home builders are selling cheap now, based on their trailing earnings, are they cheap enough?
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New home prices usually come down faster than existing home prices, because home builders do not have the same attachment to new homes as homeowners to their existing homes. Existing home prices in my area did not buckle much yet. But sooner or later I believe they will, when many of the buyers who teased by low interest rates over-stretched themselves a year or two ago end their honeymoon with their adjustable rate interests-only home loans, and when it finally settles into people’s mind that home prices are not going to go up any time soon. Although home builders are selling cheap now, based on their trailing earnings, are they cheap enough?
Read the complete article
