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With new home sales at 50 year lows, it remains a buyers market
Date:-08-Sep-2011
High unemployment, falling home prices in some parts of the country and a weaker economy have left many people reluctant to buy a home, which is having a particularly adverse impact of the new homes sector in the USA.
Around 1.3 million new home sales were being recorded at the peak of the market in 2005. But the annual rate fell to just 298,000 units in July, the lowest level since record keeping began in 1963. Consequently, house builders are being forced to slash prices further in order to entice more buyers, presenting fresh investment opportunities for astute investors.
The opportunity to buy property at or below build cost is quite probably a once in a lifetime investment opportunity, particularly for those investors buying new homes in Florida, where there is plenty of long and short term rental demand, which in turn is boosting rental yields in some parts of the Sunshine State.
Despite the sluggish nature of the new homes market, many house builders continue to add to their land bank in anticipation of an eventual upturn in the market.
Developer Hovnanian, for example, spent around $125 million (€88.6 million/£77.6 million) on purchasing about 1,440 lots and to develop land in the second quarter of this year.
"They're [Hovnanian] not changing their philosophy on land buying," said Vincent Foley, a builder analyst with Barclays Capital. "Their view is that they need to buy a healthy dose of land in order to be able to participate in any upturn."
Other house builders are adopting similar strategies ahead of an eventual market improvement. But for now, it remains a buyer’s market, and that means lots of opportunities for active property investors.
