Though there have been signs that the economy is slowly stumbling toward recovery, single-family housing demand and construction starts continue to struggle. Tight lending standards, combined with consumer skepticism toward the “American Dream” of homeownership, results in the obvious: Though development is increasing somewhat, we won’t soon see a plethora of for-sale homes sprouting out of vacant lots as we did during the mid-2000s.
According to the National Association of Home Builders, housing starts in 2011 totaled 609,000 units, versus the 1.3 million units recorded in 2007. NAHB found that there was also a decline in new home sales between 2007 and 2011—776,000 homes were sold nationwide in 2007, but that figure dropped to 305,000 in 2011.
Anthony Souza, president of Tracy, CA-based Souza Realty & Development Inc., says things aren’t likely to change in the near term, either. In a normal home building cycle, he explains, there’d be an uptick in single-family development. But the bust of the late 2000s was anything but normal. “There’s still the big foreclosure overhang that hasn’t been wiped out,” he comments, not to mention the issue of the so-called “government twins,” Fannie Mae and Freddie Mac. Furthermore, people are shackled to their homes for various reasons, mostly financial.
From a commercial real estate perspective, the question revolves around those plots of land so eagerly acquired by homebuilders less than a decade ago. It would be reasonable to assume that, in a supply-and-demand economy, developers and investors could swoop in and get some good deals on land from homebuilders. Municipalities, eager to attract more revenue into depleted coffers, might also be willing to help generate new uses for that now-vacant land.
But almost everyone knows the results of assumptions. Though a commercial developer might find some benefit in buying land zoned for single-family purposes, this tends to be more the exception than the norm…
…To read the rest of the story, go to the April 2012 issue of Real Estate Forum.
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