The Housing Chronicles Blog: Vacant Home Inventory at Record High

Monday, March 3, 2008

Vacant Home Inventory at Record High

Due to tight credit and high cancellation rates at new-home communities nationwide, the inventory of newly built homes that remain vacant stands at about 200,000 -- the highest level noted since the Commerce Dept. started tracking this data in 1973. While most builders have dramatically scaled back their operations and ceased building out new communities, in order to get some cash flow to maintain their core operations many have no choice but to complete existing projects. Apparently that doesn't sit well with many recent homebuyers, but given the choice between appeasing critics or staying solvent, which would you choose? From a Bloomberg story:

Almost 200,000 newly constructed single-family homes are sitting empty in the U.S., the most since Commerce Department statistics began in 1973. Partially completed developments reduce revenue for cities and towns and hurt businesses, said Nicolas Retsinas, the director of Harvard University's Joint Center for Housing Studies. Rising foreclosures and falling property values may cut tax revenue by more than $6.6 billion for 10 states, including New York, California and Florida, the U.S. Conference of Mayors said in a November report...

About 370,000 new homes are for sale because people who initially contracted to buy them backed out, according to estimates in a Feb. 15 report from analysts at New York-based CreditSights Inc. An additional 216,000 homes are under construction, according to Commerce Department data.

In January 1973, the number of finished new homes for sale was 97,000, when the U.S. population was about 212 million, according to the U.S. Census Bureau. In December 2007, 197,000 completed homes were on the market and in January 2008 there were 195,000. The current population is 303.5 million...

Homebuilders can't wait. They're cutting prices even further than last year and some are courting real estate brokers and using auctions to get rid of homes. They usually rely on their own staff to sell properties.

``It's a desire for the companies to do whatever is necessary to retrench and put themselves in a position to succeed when the residential markets turn more favorable,'' said Keven Lindemann, director of the real estate group at SNL Financial in Charlottesville, Virginia.

The five largest U.S. builders had almost 8,900 completed homes for sale at the end of their most recent quarters, according to data compiled by Bloomberg.

D.R. Horton Inc., the second-biggest U.S. builder, held an ``UnAuction'' on Feb. 16 and Feb. 23 with prices cut as much as 50 percent at 23 developments in Southern California.

Pacific West Cos., a Reno, Nevada-based builder, said this month that it's offering a ``risk free'' price guarantee to buyers in its California communities...

Builders such as Los Angeles-based KB Home and D.R. Horton of Fort Worth, Texas, are seeking out real estate agents to bring buyers to developments, said Joellen Chappell, sales manager at Century 21 M&M and Associates in Stockton, California. Century 21 realtors are now getting commissions of as much as 4 percent for a sale.

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