Builders Feeling Effects Of Slow Market

(The slow housing market has rippling effects on all sectors of our economy and businesses in general. )

There are way too many homes for sale on the market right now and this is wrecking havoc on the home building and construction industry.

Since the market is already saturated with way too many resale and new homes, what are builders supposed to do?

Well, first of all, cut back – and that is what just about every major home building company is doing across the nation.

A September 8, 2006 article by Kelly Bennett of the voiceofsandiego.com, “If they build it, buyers will come?” looks into how some home builders are fairing during the slow market.

The way that builders are being affected by the cooling market can best be seen in their break rooms, according to the article.

“If you want to know how a home building company is holding up in an uncertain housing market, just peek in its break room. That's been the most apparent symbol of belt-tightening seen by Travis Carter, an intern in the land acquisition department at home builder Lennar Corp., since he started working there just six months ago.” “‘We used to have amazing food in our break room for free,’ Carter said. ‘Starbucks every morning with choice of five different creamers.’ He also remembers the Greek food and other catered meals the staff would enjoy for lunch meetings. Now, he said, it's pizza once a month and Folgers instant coffee in the break room.”

During the real estate boom of the past five years, builders enjoyed sky-rocketing profits and jam-packed schedules. It seemed like everyone needed some sort of building or tract home project to be built.

But now, as the market slows, builders are required to adjust their day-to-day budgets and spending habits. They no longer have as much income coming in as they may be spending.

“A run-up in housing prices and demand followed by a recent cooling has prompted construction companies and others in the building industry to adjust their once-soaring budgets. After many in the industry saw years of double-digit revenue increases, some are now scaling back their land holdings and number of projects, which has often meant laying-off employees. Others have tightened their belts on expenses and tried to decrease their overhead costs.”

This is all because there has been a decrease in the amount of newly built homes that are selling. Builders do not only have to adjust their budgets, but they are now offering incentives and promotions to lure-in potential buyers.

This is just one of the many things they are doing in addition to scaling back and stopping potential projects that they were planning on doing.

“The effects of the cooling market haven't been felt only in the construction industry. Many analysts are concerned that the job growth in construction, real estate sales and mortgage brokering while the market was booming will mean corresponding job losses as the market cools further -- something that could further tug on the economy as a whole.”

Although things are not looking too cheery for pretty much anyone involved in the real estate, mortgage or housing worlds, things may not be that bad. The housing market goes in a cycle, so sometimes it’s hot and other times it’s cool.

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