From sddt.com:
Through four months of 2011, developers have placed a bet that there’s demand for new housing in a market dominated by severely discounted distressed properties.
While foreclosures and short sales continue to depress the housing market, builders have begun securing housing permits at the fastest rate since 2007 on the assumption that higher-priced homes that present less risk can coexist with the distressed properties that banks are increasingly releasing to the market.
Builders secured permits for 716 housing units in April, an annual increase of 120 percent and a monthly increase of 96 percent, according to numbers released by the Construction Industry Research Board (CIRB).
“The chance the industry is taking is that the lack of existing new product will itself create demand,” said Borre Winckel, president of the Building Industry Association of San Diego (SD-BIA).
It’s the highest monthly total since June 2008, when builders pulled permits for 986 units, and the highest April total since the 1,270 in 2005, at the height of the housing boom.
Home building activity in 2009 reached an all-time low in the county, with 2,990 total permits issued. Last year’s permit total increased only slightly, to 3,346.
The county needs to issue permits for the construction of 15,000 homes per year to keep up with population growth, according to Winckel
“The true measure of permit increases is a statistical false indicator, because the percentage numbers are so big, but off of such low volume,” he said.
Demand for new housing has been low in recent years due to the sustained presence of foreclosed homes available at substantial discounts compared to traditional sales.
But buyers have complained of an arduous process of buying those homes — whether as an REO or through a short sale — in which banks need documents submitted multiple times and often reject a sale after months of negotiation.
Distressed properties also carry discounts for a distinct reason: they’re in poor shape and can require expensive repairs just to return to a livable status.
Builders are therefore banking on buyers’ desire for a new home that carries less risk and a less stressful sales process — especially with the current pool of new homes at an all-time low, according to Winckel.
“It’s a cautious play by the major homebuilders who happen to have the cash to wage this waiting game,” he said.
Through the first four months of the year, county builders have secured permits to build 2,225 homes. That’s the highest total at this time of the year since 2007, when builders had pulled 3,094 permits, and is a 93 percent increase over the year-ago period, when 1,152 permits had been issued.
Of the 716 permits approved last month, 520 were for the construction of multifamily units, bringing the year-to-date total to 1,499.
There were 1,092 multifamily permits approved in all of 2010.
Yep, people are going to want new homes instead of REO junk or sketchy short sales.
Fixers being equally unattractive as more and more people do not know how to operate a hammer or skill saw.
Those that lost their homes will be renting in multi-unit, probably preferring townhome style houses over flats.
And, JtR, all those Boomers in their multi-level homes and who want single level houses will now consider a single level condo with an elevator in a walkable community.
The new-new normal is nearly upon us.
If you read the comments in the article you’d think they were talking SFH’s for eventual sale but the surge was entirely in MFH’s. MFH’s are more likely aimed for the rental market, especially given the better strength there.
I don’t see any particularly green shoots in this for the general RRE market.
If you purchase a new home you might wish to take the following into consideration:
1. It is very likely your new home will be further away from work and other desirable services. Today the average wage owner pays more for fuel (almost $400 a month per car) from disposable income than anything else, including food, travel, and clothes.
2. You are almost assured to be paying more per sq. ft. as the builder cannot sell below replacement cost. And, aside from your comments about fix up costs,some older homes are much better built than new ones.
3. How much do you thing landscaping costs? That is often left out of the equation. And, it takes years, if not decades to grow, unless you want to purchase a full grown palm tree for $5,000.
4. You are eliminating yourself from the opportunity to get a really good deal on a short sale or auction. Granted, it takes more work to find these but it can be an interesting and educational experience if you would like to expand your knowledge of the real estate market and how it works. You can even take courses at a community college and become a real estate agent or broker. I did it and it was well worth the time even though I have never worker formally in the field. What you learn can save you a lot of money and if you are young, you will use it all your life.
5. I, personally, have always felt that a new home experience is nothing like a new automobile experience. I like the feel of a lived in, mature abode. But, to each his own. I guess the extreme is in Europe, especially England. One will pay an extreme premium for a “period property”, and for good reason.
6. And, last, but not least, you will likely not know who your neighbors will be and lack a sense of the community vibes.
To each their own, you pays your money and takes your choice.