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2016 ends with new construction instability

On Behalf of | Dec 28, 2016 | Residential Real Estate |

Real estate investors and developers in California may be interested in learning that the construction of new residential properties around the country dipped significantly near the end of the year. Although residential property building had reached a peak that hadn’t been seen in almost a decade in October, November marked significant downswings that revealed the market’s inconsistent progress.

The downswing didn’t come as a complete surprise, but its magnitude was unexpected by many. In November, permits sunk by 4.7 percent, and new single-family home building dropped by 4.1 percent. For multifamily homes, the drop was more dramatic, resulting in a downswing of some 45 percent compared to the previous month’s big 76 percent jump.

Experts cited numerous factors that might be affecting the market’s progression. Home builders have smaller skilled work forces to tap into, and open lots aren’t as widespread as they once were. In addition, rates for 30-year mortgages have been on the rise, reaching their highest level since late 2014 in mid-December. Despite all of these conditions, some market observers seem to remain confident in the fact that the incoming presidential administration and positive outlooks among home builders will help the residential real estate industry thrive in the months to come.

Residential development activities depend on more than simply finding a willing partner or accessible financing. Builders and property owners also need to heed market conditions, and the fluctuating nature of the modern economy means that their contracts should incorporate assurances that help them avoid serious losses. Discussing their contract terms and property development plans with an attorney might let real estate players shore up their deals against economic factors that are beyond their control.