We need to be building more new houses in America. This blog has well documented how buyer psychology has changed dramatically in 2012, and the positive momentum continues. People want to buy homes, and inventories are extremely low.
Check out the Center?s website to see that the inventory of homes for sale in Texas is now at an incredibly low 4.3 months.
With growing demand and scarce inventory of homes to choose from, price increases are inevitable.
In this environment, it makes sense to start building homes again. I can hardly believe I?m saying this, because I remember in 2008 saying the last thing we need to do is build more homes. But that was five years ago.
The problem is that small and medium-sized home builders rely on banks to get construction loans to build homes. When the housing market blew up in 2008, banks took heavy losses on construction loans and their regulators frowned upon making new ones. As a consequence, from 2008 to 2011 it was almost impossible to get a loan to build a ?spec home? to put up for sale. While bank appetite for real estate loans is increasing, in 2013 it?s still hard to get loans to build a new house.
Therefore, you have a dichotomous market in home building today. There are a small handful of home building companies that are publicly traded on the stock exchanges. Names like DR Horton, Pulte and Lennar. These firms can raise funds to build homes by selling stock. Conversely, the overwhelming majority of home builders is not publicly traded and relies on banks for financing, which is so hard to get.
You might deduce from the above facts that it would make sense for home builders to ?go public,? sell stock and build more homes. If you made such a deduction, you would be right. It?s starting to happen!
On the last day of January, Tri Pointe Homes raised $233 million by selling stock through an initial public offering (IPO). They were the first home builder to IPO since 2004. Tri Pointe will now have plenty of funds to start building houses again.
Look for more home builders to launch IPOs in the coming months. As they do, capital will begin to flow more freely into the construction of new homes. This will create construction jobs. The multiplier effect of a new home being built is massive.
The cold north headwind against economic growth changed to a warm southerly whisper of a tailwind in 2012. Watch how a gentle breeze can increase to a gusty wind when Wall Street money returns to the housing market.
Keep up with the latest Texas real estate news. The Center has several RSS feeds designed to help you make better real estate decisions.
Source: http://blog.recenter.tamu.edu/2013/02/good-single-family-market/
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