by Robert Foehl

Created on: August 30, 2010

The current state of the housing market complete with the United States government assuming control over lending giants Fannie Mae and Freddie Mac has impacted the American economy in many ways and caused serious shake ups particularly in the housing and financial sectors. This housing and mortgage implosion has also created a perfect storm that the homebuilding industry is desperately attempting to weather. With home foreclosures skyrocketing, the homebuilding industry has been left at a virtual standstill with the demand for new houses grinding to a halt as the market has been flooded with new homes that remain vacant.

                During the housing boom, homebuilders were buying up land and developing it as fast as they could to keep up with the rapidly rising home prices and demand from those that were looking to profit from the seemingly ever-expanding market.  By nature the homebuilding industry can take months to complete a finished unit and when the housing market took a turn for the worse, homebuilders were left with incomplete houses and an excess of land and finished home inventory.

Supply and Demand

According to a United States Census Bureau report released for the second quarter of 2008, around 2.8% of homes in the United States were vacant and for sale in April through June.  This is down from the 2.9% seen in the first quarter of 2008 but still amounted to around 2.2 million homes nationwide.  For homes built in April of 2000, around 9.8% of these were vacant, more than triple the number of houses constructed earlier than that.  With builders capitalizing on the booming market and flooding it with new homes, even in the second quarter of 2008 with a declining market in full effect, the National Association of Realtors still showed an increase in home inventory.  With the flooded market, the median home prices fell over 6.1% from the prior year.  In addition, an increase in the unemployment rate is also contributing to the slowdown in home purchases (Luhby, T., 2008, July 24).

                According to New York University economist Nouriel Roubini, the falling home prices due to a flooded market are not necessarily a good thing.  “(Falling home prices) are pushing down the value of homes and putting millions of  people underwater.  Already

• 1
• 2
• 3
• 4
• 5
• Next Page >>