It's cynical but true. Bad housing news is always good for somebody. That's why the National Association of Realtors says there's no such thing as a bad market, but housing was made worse by overbuilding.
Many blame builders and their overeager response to non-occupying buyers like speculators and second home buyers for the housing crunch in places like Naples, Florida, and Las Vegas, Nevada. Unsold new houses and condos put pressure on older home sales, which impacts individual sellers.
New homes are hard enough for sellers to compete with, because they're, well, ...new.
That's why sellers should rejoice at the latest builders' news -- that housing starts for December dropped 38 percent from a year ago. Building permits (lowest since May 1993) and completions both dropped eight percent.
From 2006 to 2007, about 1,376,100 building permits were issued -- 25.3 drop below 2006 when 1,838,900 permits were issued.
Housing starts were also down nearly 25 percent.
Completions -- the equivalent to existing housing sales -- were 24.2 percent below 2006. About 1,500,200 housing units were completed in 2007, 24.2 percent below the 1,979,400 completed in 2006.
Before you go feeling sorry for the builders, look at it this way.
Builders are still overbuilding.
The National Association of Home Builders says that the sustainable, sellable number of new homes is about 1.8 million annually. We have a glut of new homes because builders have built above that level since 2003, and as late as 2006. Here are just four reasons why.
- Like baseball players on steroids, housing has upsized 100 percent in the last 50 years, to break the square foot record in 2005.
- Households are growing, but they're being driven by singles, not married couples with children requiring McMansions. In 2006, for the first time ever, single heads of households outnumbered marrieds.
- Between 2004 and 2006, one-third of homebuyers were non-occupying.
- Lack of affordability is preventing young people from launching out of their parents' basements. Household formation should be about 1.5 million a year, and we're at half that.
- So not only are we over building, we're over building overpriced houses for the wrong buyers.
And that's just off the top of my head, folks.
The bottom line is builders will have to reduce inventories and prices much more before new and existing housing can turn around.
