NEW Home Construction Slowdown Could Have Dual Impacts

As stated in the article from the California Building Industry Association below, new construction has slowed down significantly (62%) over the last year. While this may have been necessary, given consumer's hesitancy to buy, they warn that we may have gone to far. Once buyers start buying again, it could cause a frenzy over a shortage of inventory.

I still think this is a great time to buy as interest rates continue to remain low and prices have not yet started their rise. That is sure to change once the migration begins...

Here's the full article.

New home construction starts in California fell 62 percent in January as homebuilders continued to cope with slow sales and the ongoing credit crisis, according to the latest data from the California Building Industry Association (CBIA). Builders pulled just 2,608 permits for single-family homes statewide in January, a 28 percent decline from the previous month.

CBIA Chief Economist Alan Nevin said the drop in new residential projects breaking ground coupled with the ongoing push to move existing inventories, carry the potential to produce a "severe shortage" of new housing once the real estate market rebounds.

"We have rarely had a situation where interest rates are low and the California economy is stable and yet there appears to be hesitancy among potential homebuyers to make the critical purchase decision," Nevin said. "We do know, however, that within the near-term future, the market will decide, often en masse, to begin the home-buying process, but this time there will be a severe shortage of new product."