In our last post, we discussed the residential foreclosure rate in Baton Rouge. One of the interesting things about the Baton Rouge foreclosure picture, according to RealtyTrac Inc., is that there are very few homes in the "pre-foreclosure," or default, stage. Instead, about 60 percent of the foreclosure properties are scheduled for public auction, and 40 percent are bank-owned.
That translates into a good number of existing homes on the market for lower-than-market prices. We have discussed this before, of course: This inventory depresses sale prices for homes that aren't in foreclosure, and everyone suffers. Especially, it seems, in the new home construction business.
The U.S. Department of Commerce released new home sales data this past week, and home builders were not pleased. According to the department's Census Bureau, June numbers have lowered the overall forecast for 2012: By the end of the year, home builders should sell about 350,000 new-construction homes, an 8.4 percent drop from May's projection.
Granted, the total is still far better than 2011, when only 306,000 new homes sold. Last June, the forecast was even lower, at 304,000. So, home builders should be encouraged that the market has improved overall.
Alas, no. Many construction companies remain idle while the rest of the housing market tries to right itself. The supply of foreclosure properties hasn't helped, and lenders are making it more difficult for buyers to obtain mortgages. Then, of course, there's the global economy -- no one can predict when or if Europe will recover from its country-by-country meltdown.
There is one other problem that builders may not overcome for some time: a lack of land to build on.
We'll explain in our next post.
Source: The Wall Street Journal, "Land Problem Weighs on New Home Sales," Robbie Whelan, July 25, 2012
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