ZERO New Home Constructions For The Next Year

It is surreal for me that we are continuing to build new homes today and that analysts were surprised that new home constructions fell sharply in September “Home construction falls sharply in September” by the AP. I am just amazed that new homes are being built. There is a disconnect between the reality of the market and what industry do. Are we going to have to bailout the big developers as it was done in Germany?

The current residential market is terrible in numerous markets around the United States. In some specific locations, San Francisco, Palo Alto, Downtown Boston, Manhattan etc… property values are barely holding or declining at a much slower pace. But in most other places in the US, markets are plummeting. So why should we continue to build new homes except to keep some people in business. More properties on the market mean that prices are continuing to go down. It also means that banks who were thinking to sell their portfolio for $0.35 / $1 now will sell for $0.25 / 1$. Thus more loses, it has to stop at some point.

Let’s stop building for a period of time. This does not mean stop making plan for future buildings and developments but for now we need to stop. Everybody in the development industry should take 6 months vacations. Another way should be to pay developers not to build for 3 to 6 months.

Continuing depreciation of property values is a problem for hard money lenders. Lost in values could make hard money loans even more difficult to get. Less money available would make the situation even more challenging than it already is.