Expecting surplus inventories
Is it reasonable to expect surplus inventories coming to the PS housing market real soon now? And is it reasonable to expect that will have a hit on prices?
The CW might be that, if mortgages become harder to get, and prices go stagnant or fall, that owners will start to pull their homes off the market since they won't get a good return. So that dampens the direct supply vs demand.
But what about all the developers who have bought up plots of land all around the metro area with plans to drop in lots of units? If you've built and haven't sold, will you (and your investors) hold out on a high price for your leftovers, or choose to cut your early losses by dropping price on empty units?
If you haven't built yet, do you hold onto a vacant lot making no money, or do you build anyway and take the lower return?
Seems to me that all the developers in that position will end up pumping units into a reduced-demand market for a year or two, which will they will have to sell at cut rates. Unless of course they get a bailout (bastards).
IANAREA. Does this theory have any merit?
The CW might be that, if mortgages become harder to get, and prices go stagnant or fall, that owners will start to pull their homes off the market since they won't get a good return. So that dampens the direct supply vs demand.
But what about all the developers who have bought up plots of land all around the metro area with plans to drop in lots of units? If you've built and haven't sold, will you (and your investors) hold out on a high price for your leftovers, or choose to cut your early losses by dropping price on empty units?
If you haven't built yet, do you hold onto a vacant lot making no money, or do you build anyway and take the lower return?
Seems to me that all the developers in that position will end up pumping units into a reduced-demand market for a year or two, which will they will have to sell at cut rates. Unless of course they get a bailout (bastards).
IANAREA. Does this theory have any merit?
Comments
I don't think we are going to see more huge numbers of houses coming on the market, but I think sales will drop off, pushing months of inventory into the 6-8 mo range over the next 6 months to a year and putting us solidly into a buyer's market.
Even in a downturn there will still be buyers. My guess is about half of the peek last year, with inventory hitting 11-12K next spring.
I drive by that Horton development every night, and the price got my attention also--I suspect, based upon the fact that there appear to be zero foundations started, that this is the price for just the improved (utilities installed) lot. I'll have to stop in and check.
http://www.drhorton.com/corp/GetCommunity.do?dv=Y7&pr=44176
We won't see any lowering of prices on the Eastside until a recession hits.