Ken's Naperville Real Estate Blog : REAL ESTATE NEWS FRIDAY APRIL 25TH

REAL ESTATE NEWS FRIDAY APRIL 25TH

So I wrote a post yesterday, titled Housing Decline-What is really going on

In it, I thought that we real estate agents are spending too much time blaming the media for their coverage of the housing market.

I thought our time would be better spent getting our homes priced right so they would sell.

So I decided to look closely at my Chicago Tribune business section this morning and see how the news is being portrayed.  Here goes:

Page 2:  Centex:  Centex Corp., the largest U.S. home builder plans to pull out of the Detroit area as demand slumps.  Sounds scary.

Page 3:  Kimball Hill:  Kimball Hill, which has filed for Chapter 11 bankruptcy protection is hoping to find investors to rescue the home building company.  Also scary enough.

Page 4:  New Home Sales:  Sales of new homes plunged in March to the slowest pace in 16 1/2 years as a two year housing downturn extended into the start of another spring sales season.  Fairly scary too.

OK.  Not all fun and balloons.  Three stories.  All bad.  One business section.

But they are all true.

More importantly, they might not be that bad, unless of course you are a home builder.

If you are looking to sell your home, home builders are your enemy.  They are flooding the market with inventory. 

They continue to build even in markets that cannot support the building. 

Centex is just now pulling out of Detroit?  That market has been very tough for years.  They should have gotten out a long time ago.

My point is home sellers and buyers, home builders struggles are probably good for you.

If you are selling, less competition.

If you are buying, they are offering very good incentives to move their remaining inventory.

Either way, contact me and I can help.

Plus if the big boys are struggling, it sure makes me feel better about my business!:)

Ken

www.kensfeaturedhomes.com

 

 

Comment balloon 4 commentsKen Tracy • April 25 2008 08:34AM

Comments

Ken.  Dang it guy, you're 2 for 2.  I swear if you can make it three in a row, I'm subscribing.

As an aside, home builders continue to build in crappy markets because they rarely have an economically feasible choice.  That is, home builders buy land for development years and years before they build the first house.  Right now, home builders are sitting on lots of dirt and subdivisions that they bought at the peak 5-6-7-8 years ago during .com boom times.  They've spent money to get zoning, put road and utilities in and otherwise developed this dirt.  All this can take years.  They rarely can just "sell" the land since they have too much money (and ego) invested in the project and they wouldn't get out what they've put in.  Many homebuilders ARE actually just dumping the land and taking the hit no different than lots of home owners selling their home at a loss just to get out from under unmanageable payments.

Of course I'm not totally sure builders dumping inventory houses helps pricing in the short term but ... 

Anyway, congrats on another insightful on the point post.

Posted by Leonard Thomas (RE/MAX Dallas Suburbs) over 9 years ago

Hi Leonard.  Are you telling me you didn't like I can sell any home.  I just hope it doesn't smell.??

You are tough to please:).

Thanks for commenting,

Ken

Posted by Ken Tracy, Helping clients buy and sell since 2005 (Keller Williams Realty Infinity) over 9 years ago

I'm glad you hit on my current favorite subject.

I am in the construction business.  I'm owed money by the national companies, but more importantly am having my margins squeezed by residential builders scrambling to find something and now bidding commercial work.

I don't know who's more guilty, the big builders, or the banks.  They both got their heads beyond their skis.  Because you're writting about the builders, I'll throw in my opinion.

The Chicago market used to be dominated by guys named Vinny and Joe that built houses.  When the market was bad, they sat on the farm land their uncle gave them and didn't build.  They still were able to go to Florida in the winter and drive a big car, so it didn't matter if last year they made $250,000 and this year they would only make $60,000.  They had accountants that would find the silver lining.

Now, publically traded companies with huge staffs come in and have to grow.  If they didn't, their investors are upset.  Last year, they build 100 houses.  Next year they need to build 110.  The year after, 125.  They aren't as concerned with profits as sales.  They are so smart, with sales come profits.  So they bid up the land amongst themselves.  They over build and make huge money for 10 years.  Did they save it?  No.  Do they care that they went from 100 houses to 1000 houses?  No.  When we had spec houses, we waited to sell them.  The big guys call them inventory.  They make a better product than their competitors, so people will still buy theirs.  Keep growing.

Ooops, the economy slows (I could even debate that the economy is fine, so long as you don't build houses or cars).  Now they have to sell their jets (jet fuel is expensive), fire the lower priced guys, and buy their competitors (who hired the guys they fired and bid up the land against them).

I'm glad I don' work for a publically traded company.  Florida is nice this time of the year.

Posted by Boring Rich over 9 years ago

Hi Boring.  Great comment.  Insiders view always appreciated here.

Thanks,

Ken

Posted by Ken Tracy, Helping clients buy and sell since 2005 (Keller Williams Realty Infinity) over 9 years ago

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