I mentioned that each home built creates an average of three jobs for a year and generates about $90,000 in taxes, according to data from the home builders association. This should mean that everyone is in favor of supporting our efforts to build new, quality homes for the sea of homebuyers out there looking to call our communities home, right?
Not so much. Our industry faces some new challenges as we look to create the kind of supply that the American homebuyers are demanding. The credit crunch is hitting construction particularly hard; “Our members are caught in an ‘argument’ between banks and federal regulators, who take turns pointing fingers at one another when we try to determine who is to blame for the serious lack of lending to the construction sector,” said National Association of Home Builders Chairman Barry Rutenberg. “Restoring the flow of credit to home builders will not only help to put America back to work, it will help provide badly needed tax revenues that local governments need to fund schools, police, firefighters and other public services,” said Rutenberg (article).
This lack of credit is hitting land developers who prepare the infrastructure for subdivisions and housing communities. What this means is a shortage of suitable land on which to build these new homes. “We’ve heard the builders moaning about the lack of land, lack of land. Now we’re starting to see that,” said John Burns, a prominent home-builder consultant. “The master planners are holding out for better prices, the farmers are holding out. The land sellers are all waiting for the market to come back. The result is the builders can’t find land at the prices they want” (article).
Much like the resale home sellers, land sellers are anticipating higher prices as well. The issue at hand is that with the mentioned lack of credit there is simply only so much developers can afford to pay for this land in any kind of market. What we see then is a shrinking supply of loans available coupled with sellers who are unwilling to sell or who are looking to sell at higher prices. As Rutenberg pointed out, this once again leaves builders stuck in the middle.
The upside for us is that here in Washington at Encore Custom Homes we are extremely lucky that our experience and our relationships with both banks and landowners in the community means that we are able to continue the growth of new construction, providing new homes for buyers and stimulating the economy. The eastside has continued to be a welcoming environment for our enterprises and we are, as always, appreciative of the business we’ve been allowed to develop in our area.