Builders certainly took some of the biggest beat-downs after the housing bubble burst. Builder close outs have brought big profits and tasty deals for real estate investing companies and many have questioned whether it may be another decade before they start putting up new homes. Well, sorry to all the pessimists out there. The US Commerce Department reported the fastest rate in building last month that we have seen in 17 months. Up 15% from the previous month, 658,000 units got underway in September.
This is great news for real estate investing and doesn’t appear to be a trend that is likely to slow anytime soon either. The National Association of Home Builders continues to report rising positivity amongst its members, promising more new construction and ultimately higher home values all round. It is no secret that you can buy foreclosures and REOs much cheaper than it costs to build new today, so sales of this new inventory will have to bring up prices and values as well as profits for real estate investing companies who are flipping houses.
So instead of being afraid of this new inventory and competition, real estate investing pros may do well to take a look at deals in the vicinity of areas seeing the most new developments. One of these areas is South Florida. Last week on project broke ground with 60% of units already sold. Then you have Donald Trump’s $170 million purchase of the landmark Doral Golf Resort & Spa as well as the $170 million Brickell House condominium tower which is expected to open in 2014.
Of course real estate investing companies should be cautious and keep an eye out for another round of over development but soaring builder confidence coupled with real sales is definitely a good thing for everyone.