Will
home builders be able to take advantage of the slow climb uphill in the recovery
of the housing market?
Certainly, a valid
question and definitely one that you must explore if you’re a builder.
There is a definite
up trend taking place with the national builders. Over the past year,
homebuilder stocks have risen 80%. That’s at least five times the S&P 500
indexes for the stock market.
What is happening is
being fueled by low interest rates, a dwindling supply of homes that now represents
only a five-months supply versus the 11-month supply of a year ago. Under these
circumstances, it is reasonable to expect this trend to continue.
Nevertheless, what
about the small local builder?
If you look behind
the fog of economic recovery, low interest rates make affordable homes more
attractive to younger buyers. Let me explain.
If you’re a young
couple, say between 25 to 38 years of age, both fortunate to be working,
presently renting, owning a home is becoming extremely attractive for this
simple reason. With low interest rates, a starter home with a price tag of
$125,000 to $150,000 is cheaper than rent. If they are even close in the same
amount, it makes good sense to own over renting.
For the local
builder, this is your emerging market.
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