Six years after crash, builders of new homes enjoy an upswing

After six long years, the home-building sector is back in business: sales of newly built residential homes are climbing strongly this year, according to a report by John Burns Real Estate Consulting.

The economists at the Irvine firm highlight 25% growth in year-over-year new home sales, and an increase of 36% from the bottom, which was reached in 2011. The firm’s data show that new home sales currently account for about 8% of the market, up from a low of 5% during the bust and down from about 16% during the heady days of the bubble.

“Despite the fact that the new home market suffered disproportionately compared to the existing home market during the downturn, new home sales are now outpacing resale sales on an annual basis,” wrote analyst Rick Palacios Jr. in the firm’s report. “The turnaround is still fragile, so we are closely watching the conditions that could cause the performance spread to narrow very quickly.”

Palacios pointed out that the lack of “distressed” inventory (foreclosures and short sales) is artificially keeping a lid on sales of previously owned homes because banks are so slow to foreclose. He also said that there is a dearth of good development opportunities available and that could also “constrain” new home sales.

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