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Thu, Dec 18, 2014

Rising home sales signal changes in future supply

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September proved to be another great month for home sales.

Overall, the monthly volume did decrease from August, but many in the real estate community were expecting the seasonal drop.  

The numbers to watch are the same month last year and the year-to-date comparisons, which continue to outperform last year’s data.

Here is some interesting data from a good friend who has been tracking the new home markets for several decades.  

Edsel Charles, of MarketGraphics Research Group Inc., has been providing new home market research information for builders, developers, banks, city governments and others for more than 20 years.  

According to the data, 11 counties have experienced amazing changes.

In June 2008, 1,290 subdivisions were under development. Four years later, there are only 871 subdivisions underway.

In June 2008, there were 36,320 lots, and as of the same quarter this year, it had fallen to 21,516.

From June to the end of 2017, more than 36,000 lots will most likely be used.

So, at an estimated 2.2 lots per acre, more than 211 acres per month must be developed in order to keep up with demand.

Many in the real estate industry feel that within about eight months the reasonably good sites will be substantially gone.

This could result in a lot crisis, which could become evident in the amount of plots in the pipeline, as well as a lack of developers and investors.

Edsel goes on to say that from May of this year to next, the real estate market could likely see an increase of up to 8 percent in the prices of new homes.

What does all of this mean for the average homebuyer or seller?  

As the lot supply shrinks, the cost to homebuilders will rise, which in turn, will cause the prices of new homes to also increase.

As the quantity of new homes decreases, more buyers who would have purchased new homes will have to buy existing houses.

This shift in the market will cause existing home prices to also rise.

By the time this lot shortage occurs, the economy will have already improved.

With many new jobs and the foreclosure rate in decline, financing will eventually loosen.

Hopefully, Americans will not forget the lessons learned during the most recent housing crisis, and all of the stakeholders involved will still proceed with more caution when developing, building and financing homes.

The good news is the market is improving, and industry leaders are already discussing how to manage supply shortages and price increases.  

It beats the discussions of the past four years, so everyone still has reason to be optimistic about the future of the real estate market.  


For a full version of a four county Red Report with more detailed numbers, visit www.RedRealty.com.

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Banking, Economy, Finance, Housing, Real Estate, Red Report, Rutherford County
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