Building in a bear market

There was a mini building boom in February. But with homes sales at their lowest levels in years, why is anything being built?

From CNN Money

NEW YORK (CNNMoney.com) — The pace of homebuilding stepped up in February, an unusual bit of good news in the devastated housing market. The number of housing permits issued and homes starting construction both rose at an annualized rate of 547,000 and 583,000, respectively. However, they were still off nearly 50% compared with February a year ago.

Meanwhile, the inventory of existing homes for sale is at a 10-month supply, and sales of both new and existing homes are at their lowest levels in years. So why are homes still being built at all?

“There’s a minimum level of building activity that goes on even in recessions,” said David Crowe, chief economist for the National Association of Homebuilders (NAHB). “People are building their own homes or acting as general contractors and hiring our members to build them. That’s in the range of 200,000 to 300,000 homes a year.”

The Real Estate Bust had hit Home Builders hard, and even with banks hording their cash (making loans for builders nearly impossible to get), there is still a thirst in the American population for new, modern homes.

In Austin, new homes in the lower-end markets are flurishing, which upper-tier home starts have slumped due to lack of financing.  There are still projects popping up, and the great news for the luxury market… only the strong builders have survived and with a newly-picky class of buyers out there, there is a higher demand for quality.