Here’s a local builder who knows how to adapt. Not so long ago, the best new home buys in Reno were out in Cold Springs (still are), but they started in the mid-to-high twos. Now they start in the high ones. Lifestyle Homes has quietly adjusted to the realities of the market. visit
A few weeks back, I was on a local radio program with Brian Kaiser, a senior analyst who produces housing reports for UNR’s Small Business Development Department. He looks at MLS figures and also painstakingly combs through Assessor records to determine new home sales. more
His take on the current situation was that, despite the downturn, most new home subdivisions are selling 3-4 homes a month. Yes, they’re coughing up incentives to accomplish this, but the incentives are working. Brian’s take was that this level of sell-through is plenty to keep most of these homebuilders in business.
Sure, they may cut back on new acquisitions of land, and yes, they may need to trim the corporate fat. But this is enough to sustain them, enabling them to continue building through their current commitments, though perhaps at a slightly reduced pace.
In other words, the sky is not falling. But resale homes in the vicinity of these new homes will have a much harder time competing because, due to economies of scale, the builders have much more leeway when it comes to cutting a good deal.
2 comments
Diane’s bloggers,
Speaking of the Assessor’s records, is it my imagination or are they not updating their sales database regularly anymore? I have found less frequent updates and more missing information. I guess fewer transactions equals less information…
It must be one of my 60’s flashbacks, to Question Authority. Also, I have not seen the RGJ publish any articles from Zack Hall recently. Conspiracy Theory, not me…
Waz
Perhaps Mr. Kaiser ought to spend more time reading this blog. There have been posts here for many months now saying that the builders will continue to build until their profit margins are reduced to zero. This is not news.
I do not recall one post here ever suggesting that the sky is falling for the new house builders. Declinig profits per unit, of course. Substantial decline in operating revenues, of course. Staff reductions, of course. Falling into oblivion, no.
Now for the house resellers, the sky looks much more problematic. This also is not hard to figure out. Your example of Lifestyle Homebuilders is instructive. As the builders lead prices down, house resellers are getting wounded. Some of them very wounded. Such as your client on Cinnamon in Wingfield Springs.
HR Horton has $2 billion in cash. KB has annual revenues in the billions. As does Lennar and Pulte and Toll. It has been asked here before: Just exactly how are Mr. and Mrs. Joe Sixpack in Wingfield Springs, or South Meadows, or Sierra Canyon going to compete on price with that?