A survey of over 100 builders was conducted earlier this year and learned that federal and local agencies have added significant building costs that did not exist 15 years ago. In many instances, the government added these costs to protect the environment and improve the area for existing residents. While these are noble goals, builders have to charge more for new homes—or simply not build homes in many instances. The bottom line is that there is a huge correlation between government attitudes and new home construction and prices. It is strongly believed that the large, affordable markets will grow faster than the other markets. We have been advising our clients to look at the friendly and affordable markets for volume growth and the unfriendly and unaffordable markets for price appreciation. We expect 62% of new households to move into the Southern states, where 42% of US residents currently live, shifting the population further south. Most builders would love to build more affordable homes, yet they cannot do so and make a normal profit margin.
Information for this blog was in a recent article by John Burns.