CONSTRUCTION DROPPED BY 14.2% IN DECEMBER

Many people are confused by why I would say construction dropping is good news. Also, new building permits dropped for the 7th month in a row. This is good news. You see builders should have slowed down building over 2 years ago. But they were greedy, driven by sales and not reality. They continued to sell to people that could not afford them and people that lied about being investors. Both of them should have been discovered by the lending process, when all financials are disclosed by the buyer.
Back to why this is good news. We can't change were we are. I wish we didn't have too much supply, but it is what it is. What we need to see happen now is two fold, increase demand and decrease supply. I have already written about increasing demand. Supply can be decreased in two ways, increase demand and stop adding to supply. When builders slow the building process, supply will decrease. I believe ALL builders should take the following actions:

1. Fully qualify all buyers before writing a contract.
2. Buyers with existing homes must sell and close on their existing home before construction starts. This use to be common.
3. Stop selling to investors for the short term. There are plenty of better deals for investors.
4. Review all homes under construction, make sure their buyers are able to close. If there are problems, solve the problem. Incentive on new home if they lower the price of their home they can't sell...
5. Discount their inventory homes, so they ALL sell.
6. Only start a home for existing fully approved buyers. No SPEC homes.

This will continue the slowing process of construction and new home applications. Once we hit a bottom, both of those numbers will rise. But we don't want them to rise because of ill-advised sales to unrealistic buyers. We don't want to see them rise until inventory levels drop dramatically.

Here is the valley, we have over 100,000 new residents every year, or more. We need housing for them. By cutting down the supply of new homes to the market, the pool of existing homes for sale will begin to shrink. Hello, this is very logical.

If you cooked enough food on Thanksgiving for twice the amount of guest you expect. You don't continue to put more turkeys in the oven. You have enough.

Home Construction Plunged in 200701/17/08 19:09 EST
PARK101, UTAS106
By MARTIN CRUTSINGER
AP Economics Writer
WASHINGTON (AP) - The steep slump in housing intensified at the end of last year, pushing home construction down by the biggest amount in nearly three decades. Analysts forecast more bad news in the months ahead with the big question remaining whether the housing slump will be severe enough to push the country into a recession. The Commerce Department reported Thursday that construction was started on 1.353 million new homes and apartments last year, down 24.8 percent from 2006. It was the second biggest annual decline on record, exceeded only by a 26 percent plunge in 1980.

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