It was reported on Tuesday that housing starts in July dropped 39% which is the most in 17 years. My question is: who was still building in the first place? Two or three ago, when things started to plummet from its peak and the handwriting was on the wall, shouldn’t most builders have curled up into the fetal position, gone into hibernation and weathered the storm? I am not saying that you should turn paying customers away, but all of the speculation should have ended. Immediately. That way the industry wouldn’t plunge further and builders wouldn’t be exposed even more.
Apparently, not everyone could read the writing on the wall and some kept building. And some ended up like Neuman homes (bankruptcy). I am sure that not everyone is through.
So, it does not surprise me that housing starts are down. It surprises me that almost 1 million people want to build in this economy. I do realize that there are some benefits to building right now. One of those is hungry/starving/laid off construction workers. I have heard a great many stories of construction workers who have been laid off and are looking for any sort of work to put food on the table. Usually this involves working for less than scale which saves a home builder money. (This can work out well for home improvement projects too! You might want to check with a business or two to see if the cost of your home improvement project has recently gone down!) However, I find it surprising that there are a million new homes that can be built based on these cost savings. With consumer confidence way down, it seems odd to me.
What is the good news? The good news is that many of the builders who were smart and went into hibernation have started building again. Why is that good? If the smart ones saw the decline coming and virtually stopped building, then by returning to building it may indicate that they see that the end of this market is in sight and it is time to start returning to work (cautiously of course). In the Midwest (where we are located) we have had encouraging sales numbers and increase in phone calls that correspond to this return to building. While it has not been a very pleasant few years, we are optimistic that we are at or near the turn back upwards.
Have a great day and keep the faith!