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In my post of June 30, 2009 I discussed how both lenders and developers have impacted the Gilmer (and national) real estate market. In this post I want to briefly mention the impact that speculative builders have on the market and then in my next post discuss how the federal government played a role in getting us where we are today.
There are basically two types of home builders; custom builders that only build when they have a customer and a signed contract, and speculative builders that typically borrow the money from a lending institution and build the house with the anticipation of selling to an buyer that is yet to be identified. Speculative builders (and the lenders that lend to them) are “betting on the come”. Today there are a total of 721 homes listed for sale on the Northeast Georgia MLS. Please note that this does not include For Sale By Owner or foreclosed properties that are not listed with local real estate companies. Of those 721 listings, approximately 100 are classified as “new construction”. These are homes that have never been occupied. Twelve of those listed were built in 2006, thirty seven were built in 2007, thirty nine were built in 2008 and, amazingly enough, 16 were built (probably started in 2008) in 2009. The remainders are listed as being built in 2004 & 2005 (questionable). Only two in the entire list are listed as being foreclosures. Generally speaking, new construction will have a better chance of selling than re-sales. When houses set on the market for extended periods of time their value drops and that also has an impact on the value and marketability of re-sale properties. Speculative building in Gilmer County has all but stopped. For the first six months of 2009 the average numbers of building permits issued were 6.3. Not all of those permits were for residential construction. In years 2005 – 2006 it was estimated that the building industry accounted for approximately 25% of the economy in Gilmer County.
I hope you are starting to see a pattern here. Too much, too quick with too little feasibility, accountability and responsibility. But keep in mind; for lenders to make money they must lend, for developers to make money they must develop and for builders to make money they must build. The problem is when they do not start by finding out if there are buyers no one makes money!
The next installment I will discuss the role the federal government played in getting us in this mess.
As usual, Max is right on point, and I assume his follow-up will be as accurate as this intro. I'm a long-time housing pro (40-plus years), and I can attest to his correctness. That average of new permits in Gilmer County probably included NO speculative construction, although there's no way you can really tell from the permit numbers. I might question Max on the impact of home building on the County, though. I think it's probably a lot more than he suggests. 25% of the jobs in the county are probably in the construction trades. Many more, though are affected. Construction workers buy food and other goods, builders buy materials (witness the closing of Ply-Mart), etc. It's really impossibly to make any accurate measure of the impact home building and real estate in general (buyers of existing homes buy things to upgrade their purchases) on the local economy.
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