New home construction rises in April

CNNMoney ^ | May 16, 2008 | Staff

[Natty Bumppo@frontier.net]

For a variety of reasons, including political bias, ignorance of economics, and a lack of basic analytical/statistical skills, the press has a three to six month lag on major economic issues.

The U.S. economy decidedly turned positive in the first quarter of 2008, even though GDP only grew by 0.6%.

Growth is improving in the current (second) quarter, and absent the usual “stupid human tricks” by the Fed and politicians, the third and fourth quarters could be very, very, good.

However, you won’t see any economic good news in the press until the second Wednesday of November at the earliest, and then only if a dim is elected President.

[dglang]

There is not much incentive to buy an old home when one can get a new home for less with the builder paying closing costs and giving financial incentives to buy from them. A new home is in perfect condition while an older home usually requires some fixup or repair.

We ae closing on a new home next friday after a few delays including one month lost after my wife lost her job. We signed the contract last October and consruction was finally completed a little over a month ago.

When buying a new home, the buyer can order a lot of custom enhancements or ‘options’ to get exactly what they want instead of only settling for what is already built. One can order both inter and exterior paint schemes as desired as well as other finishing touches.

We received $5,000.00 in options from out builder plus the builder is paying $7,000.00 of the closing costs. We were able to purchase with no money down and are getting over $6,000.00 cash back at closing on a 30 year fixed VA mortgate.

We are using the builders mortgage company to secure all the incentives. As it turns out, the builder doesn’t service the mortages themselves but immediately sells them to another underwriter.

[Polybius]

But...but....the BUBBLE! WHERE’S MY BUBBLE?.........

The Bubble is in lexusppd's neighborhood as described in his Post 6 where all those people paid far more for a house than buyers could afford without going bankrupt.

Those people now have mortgage obligations that exceed the market value of their houses and the supply of Greater Fools willing to buy their houses at Bubble prices has run out. They, in effect, bought Honda Accords for Ferrari prices.

In that other development, where the builder is selling brand new houses at sane prices that the buyer CAN afford without going bankrupt, there is no Bubble. That developer is building and selling Honda Accords for Honda Accord prices.

[lexusppd]

"The Bubble is in lexusppd's neighborhood as described in his Post 6 where all those people paid far more for a house than buyers could afford without going bankrupt."

Although the prices have dropped significantly in this particular development (I can't speak for other developments) I don't know that it was a bubble before since we have seen no foreclosures and not many people even have mortgages here since they are all over 55 and retired. Pinning down the definition of a bubble is difficult since a property is worth whatever someone is willing to pay for it. This development is about 5 years old and the price increases over that 5 years are difficult to track because the developer changed his method from selling basic homes and offering upgrades to their "Everything you want, everything you need" method in which no options are available and all homes are fully equipped.

[PghBaldy]

“Total housing starts got a boost from multi-family homes” SIngle-family was at lowest level since 1991. This is not good news.

[Polybius]

"The Bubble is in lexusppd's neighborhood as described in his Post 6 where all those people paid far more for a house than buyers could afford without going bankrupt."

Although the prices have dropped significantly in this particular development (I can't speak for other developments) I don't know that it was a bubble before since we have seen no foreclosures and not many people even have mortgages here since they are all over 55 and retired. Pinning down the definition of a bubble is difficult since a property is worth whatever someone is willing to pay for it.

If your neighborhood is relatively new and populated with buyers that bought before the Bubble madness, then your neighborhood is populated by people that bought houses at prices they could actually afford.

I own a rental property in a nice cul-de-sac in San Diego where I lived in the 1980's. During the Bubble and now during the "Crash", I am sure the alleged "price" of the house fluctuated wildly. I never bothered to find out. However, that did not affect me as the house was paid off long ago and I do not even consider its sale value in my retirement savings calculations any more than I consider Social Security. I also did not use the alleged equity in that house to borrow against it to finance my lifestyle.

I do not have a Bubble.

In the latest Bubble, the problem was not that people bought houses for what they were "willing to pay".

They bought house for what they were "PRETENDING to pay and, never in their wildest dreams, actually COULD pay".

Why?

Because mortgage brokers were churning out mortgages to anybody with a pulse and even 20 people in Ohio without a pulse (loan brokers there actually used the names of 20 dead people to create mortgages) in order to sell those mortgages to gullible, eager investors for a fat mortgage broker commission.

It was a scam no different that printing out counterfeit $10,000 bills.

Thus, some sucker bought a $400,000 house for $800,000 because a burger flipper at McDonald's or a dead corpse was bidding $780,000 for it.

That sucker, across the street in that same San Diego cul-de-sac, HE definitely has a Bubble.

[dangus]

What this is is neither good nor bad news; it’s the market responding to bad news. The need for housing is steadily increasing. Gas prices have made living in the suburbs less desirable, so people are moving to the cities. Houses are faster to start than apartment complexes, so the drop in housing starts predated the increase in apartment complexes, which is OK since there was some vacancy. The sorta bad news is that constructing apartments takes fewer workers than constructing houses. But then again, they’re all illegal aliens anyway ;^)

[stainlessbanner]

Here's something to ponder given your statement about gas prices pushing folks to move into the city....

With a glut of overpriced apartment-to-condo conversions, what happens to those units? Does the inflated condo-price fall to reasonable levels, or do those units go back to rentals?

[lexusppd]

I don’t know if the construction people where I am are illegals but you sure as hell need a Spanish-English dictionary to speak with any of them.

[lexusppd]

I understand what you are saying about mortgages for the dead and buyers living in fantasy land. But when you are talking of retired people, most who aren't even working you seldom get any of that. Ax I said very few of the people I have met even have mortgages and the majority of them sold their homes in northern NJ and NY where prices are much higher then here in central NJ. Therefore because they have lived in their previous homes so long the majority owned them outright and wound up with a nice cash windfall (and no mortgage) when they bought here.

[Polybius]

I understand what you are saying about mortgages for the dead and buyers living in fantasy land. But when you are talking of retired people, most who aren't even working you seldom get any of that. Ax I said very few of the people I have met even have mortgages and the majority of them sold their homes in northern NJ and NY where prices are much higher then here in central NJ. Therefore because they have lived in their previous homes so long the majority owned them outright and wound up with a nice cash windfall (and no mortgage) when they bought here.

Yep. They made money. Real money.

The early investors in the original Ponzi Scheme also made real money.

That is not to say they did an unscrupulous thing. Ponzi's original investors really believed his Scheme was legitimate and so did the early buyers in the housing Bubble.

Those early investors made real money. That attracted thousands of pidgeon. When the Ponzi Scheme unravelled, as it was destined to do, it was those later pidgeons left holding the time bombs that were then roasted alive.

If you downsized early during the housing Bubble, you made a good profit. (Early Ponzi investor who took his profits, got out and didn't get greedy)

If you upsized early during the housing Bubble, you are now in deep kimchee. (Long-haul Ponzi investor who stayed with the Ponzi Scheme to the end)

If you borrowed against your entire phony equity, you are now in deep kimchee as your debt is now greater than the true value of your house. (Long-haul Ponzi investor who stayed with the Ponzi Scheme to the end)

If you were a first time buyer that bought from the people who downsized early during the housing Bubble, you are now in deep kimchee. (Late arriving pidgeon that arrived just in time for the roasting)

If you held on to your old property and neither bought nor sold during the Bubble (my case), you are exactly where you were before as long as you did not believe in the phony increase of your your Bubble real estate wealth and did not spend as if that wealth was real. (Spectator to the Ponzi Scheme that neither gained nor lost real value)

[goodnesswins]

Yep, what you said....we’re going to build (corporate relocation) because everything we’ve looked at is TOO BIG, and, we can get what we want for less. (Except a larger lot.)

[jamndad5]

Just moved into a new tract in Bakersfield, Ca. Empty lots are being filled in short order. I’m stuned, I tell ya!