A news bulletin from the Denver Post just flashed across my BlackBerry: NEW HOME SALES HIT RECORD LOW IN JANUARY.My response: GOOD.
This story in the Post is meant to say the construction industry is in trouble, that builders continue to suffer, and that housing is falling off a cliff.
My response is different than that:
CONSUMERS HAVE FIGURED OUT THAT BUYING NEW CONSTRUCTION IS DANGEROUS, IF NOT CRAZY, IN THIS PRESENT MARKET.
Let me explain something that I have seen extensively over the past three years. It has to do with new construction. It has to do with builders. And it has to do with changing nature of consumer expectations.
I wrote a post over the weekend called “The Consumer is Angry”, and three days removed from that post I stand behind it 100%. The consumer in America today is mad (and I could use stronger language). There is anger at government, institutions, banks, Wall Street, real estate brokers, and yes, builders.
Builders got rich during the boom. And that’s because builders sell a retail product, with thicker profit margins, because the product is shiny and new. And when times were better, consumers would pay for it. But there’s another reason that new construction soared between 1995 and 2007, and that is because anybody who wanted to buy a shiny new house could do it, thanks to the magic of “easy financing”.
Let’s talk about financing today – it’s hard to get, if not impossible. So what did that do to the buyer pool? It killed it. And what did that do to values? Caused them to fall. And what did that do to homeowners? Put them under water. And what did that do? Made it impossible to refinance, made it difficult to sell, and made it hard for many to “get out” without simply mailing the keys back to the lender and suffering the consequences of foreclosure.
Those of you who know me know that I operate in an ultra-protective mode with my clients these days. Unless you have money to burn, why would you even look at new construction right now? Builders have deeper pockets than you do, they can discount in ways you can't, whenever they need to, and most don't care what happens to the buyer once he closes.
Just yesterday, I received a promotional email from a local builder boasting about “Huge Price Reductions” at a high-profile condo tower downtown. I looked at their email and shook my head, thought about it, and then fired back a note (which will probably never be read) – “what about everyone who already paid retail to move into your development?”
So here’s what I see in the Post’s newsflash this morning – I see a wiser consumer, xxxxed off, who says he won’t be fooled again.
That’s good news.
