During the housing boom, new-home builders were like the hosts with the hottest invitation in town. They could raise prices with every newly opened phase of a development and display a “take it or leave it” attitude toward buyers. Now, amid the downturn, homebuilders are the hosts everyone avoids. In July, new-home sales nationwide were down 10% from the previous year, and the National Association of Home Builders expects them to continue falling until the second half of 2008.

The decline in home starts (down 25% nationwide for the year ended in July) and permits for future projects (down by almost one-third) reflect builders’ much-reduced expectations. In many formerly hot markets, they’ve pulled back even more. In Orlando, Fla., and in Riverside-San Bernardino, Cal., east of Los Angeles, permits are down nearly 50%. In Las Vegas and the Twin Cities, they’ve decreased nearly 40%. The more inventory on the builders’ books, the greater their carrying costs and the more motivated they are to cut a good deal. That spells opportunity for new-home buyers. arrowmore 

From Kiplinger’s Personal Finance magazine, November 2007

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