Why aren't builders
running scared? Because the
underlying principles of a
good market remain sound in
the midst of buyers
scurrying around, afraid of
buying at the height of the
market.
While nationally, the
industry has cooled to "more
sustainable levels,"
according to the National
Association of Home
Builders, "The Bureau of
Labor Statistics reports
strong job gains in many of
the fastest-growing states,
with 37 states exceeding
their pre-recession peak
levels of employment in
2005."
The group recently
released a mid-year housing
report on its real estate
trends website,
www.HousingEconomics.com . A
cooling of the market this
year will still result in
the third highest level of
housing starts in the last
few years.
That's why you keep
seeing building projects
going up. Definitely, not as
many houses are being
constructed in 2006 as last
year, but the NAHB report
points to several positive
market growth indicators in
various regions across the
country.
Job growth is
continuing upward.
Unemployment is dropping.
Businesses continue to
expand and economists across
the country continue to
estimate that the need for
more housing will stretch
beyond the current inventory
surplus.
The National
Association of Realtors
still is holding to 2006
being another very strong
year -- the third highest on
record. NAHB members are
still bull on the housing
market. What we're seeing in
'06, it seems, is a
transition year. For buyers
who have no choice but to
buy because of social or
lifestyle reasons (birth of
new baby, marriage,
retirement, in-laws moving
in, new job, relocation,
etc.) they will buy now and
unwittingly pick up a great
deal.
For buyers who are too
skittish about the market,
they will miss a financial
boosting opportunity. In
markets where it has
normalized (such as D.C.,
Miami, Chicago, Phoenix)
buyers who buy based on
rock-hard solid economic
evidence, will be excited in
a few years that they bought
a house low and now stand to
earn a hansom profit a few
years later.
Ask anyone in the D.C.
area if they would have
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bought a lot of property in
1990 (the last time the
market took a time out) and
held to today and everyone
would grin. At that time the
average home price was about
$179,000, prices were
dropping and the job market
was faltering. Today,
housing prices are up over
last year by 4 percent,
employment is up nearly
64,000 jobs compared to a
year ago and the job market
is still chugging along in
the D.C. area. Home sales
have leveled off and rentals
are skyrocketing. I smell
opportunity.
We have 20 percent
more jobs headed this way in
the next four years over the
last four years... that
would be 256,000 jobs. While
other areas may not be as
robust, they are still
growing. If the new
employees don't buy houses,
they'll rent and that's
causing pressure on rents as
they begin growing
nationally at a double-digit
rate for some areas.
M/PF YieldStar, a real
estate market intelligence
firm, estimates that 2006
and 2007 will be boom years
for rental markets and
multi-family housing starts.
Occupancy rates surpassed an
average 95 percent mark in
the 4th quarter of 2005 for
the 57 metropolitan areas
the group tracks.
The real item to watch
for buyers is the interest
rates. As buyers keep
waiting for prices to
"bottom out" their buying
power evaporates with the
ever growing interest rates.
Just a year ago, a household
with an income of $100,000
could afford a $450,000
price range. Today, that
same income is now dropped
to about $394,000 simply
because of the interest rate
power. Current rates stand
around 6.8 percent
nationally and experts are
talking about hitting the 7
percent mark before the end
of the year.
In addition, as the
jobs keep growing, the
rentals will disappear and
pent up demand will nearly
burst forth in another few
months. Buyers -- pull out
your check books and get on
board now, while the market
has leveled. There's a
reason they call it a
"buyers" market.
Why aren't the
builders fearful? With the
job growth, you have to live
somewhere, and workers will
live in either one of their
new units to purchase or one
of the new units to rent.
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