Low Inventory Puts a Damper On Housing Recovery

New housing starts, especially in the entry level market, are down significantly.  The inventory of new homes standing and ready to sell are down. A once healthy housing market built 1.2 million homes per year.  Forecasts for 2015 are, at best, 800,000 housing starts and 600,000 sales.  It’s pretty hard to put enough lipstick on this pig to make it look good.

There’s been lots of speculation about who’s buying, who isn't and why.

My observation, in my town, is that there are fewer regional and national homebuilders, fewer new home communities, fewer model homes, fewer choices and a startling absence of smaller, local builders.

Some of the big builders weathered the economic storm.  However, in my town, two of the most prolific A&D and Construction lending community banks went under, thus eliminating that source of financing for local, small builders. Given the new CFPB regulations, I don’t see community banks jumping back into acquisition, development and construction lending any time soon, thus leaving a significant void in this lending arena.

Fewer lenders, fewer builders, fewer choices = fewer buyers and fewer home sales.

The old benchmark of 1.2 million housing starts annually as an indicator of a healthy housing market is just that…an old benchmark.