Money and Investing Thoughts

Home Front: Harsh April for Sacramento-area homebuilders.

In the current housing environment I like low new home construction numbers. With the country forming 1.5 million new households each year and only building 500k homes it will take a shorter amount of time for the inventory of foreclosure properties to be reabsorbed into the market. This does bring up a side question: Where do people who lose their homes live? Back to new housing.

New home sales are very slow, but it appears homebuilders are constructing inventory even slower. It is interesting to see the home sales figures for Sacramento as reported in the article linked above.

From 2001 until 2005 Sacramento area homebuilders sold an average of 15,500 new homes per year. They were selling these types of numbers even in 2001 and 2002, before the pricing bubble started to expand. By 2008 the number dropped to only 4,847. The final 2009 numbers may be close to half of 2008.

The economic conditions in Sacramento are very difficult right now but this is a growing region with the population expected to double by 2050. The early this century new home absorbtion of 10,000 per year seems like a minimum number going forward and 2009 will be the 4th year in a row of sub 10k new home sales.

New home construction and sales is a jobs and economic prosperity creator in itself. When the sales numbers turn positive it will be a good thing, but right now the lack of new home inventory is just what the housing market needs to stabilize.