Builder confidence in the housing market remains low, especially since the federal tax credit incentives have ended.  A score below 50 means a negative outlook and this month’s number was 14 - the lowest it has been since March 2009.  According to MSNBC.com,

Builders have sharply scaled back construction in the face of a severe housing market bust. The number of new homes up for sale in May fell to 213,000, the lowest level in nearly 40 years. And, at the current sales rate, it would take 8.5 months to exhaust that supply. In a healthy economy, new home inventory takes about six months to exhaust.

The good news is builders are not anticipating that the economy will fall back into a recession, but the recovery will be slow and drawn-out.

The great recession of 2008-09 rocked the U.S. economy.  The slowing housing market was the lead indicator of the problems ahead and home builders were quite possibly the first to experience the fall-out.  With plenty of lots snatched up during the early 2000’s, they now sit empty with only stakes marking off property lines.  The subcontractors - foundation experts, drywall installers, roofers, plumbers, electricians - have gone home.  The real estate signs are now seeing seasons change.  And the builders are struggling to make ends meet.

I’ve seen numerous reputable builders who construct solid, high quality homes fold.  I’ve been fairly shocked this past year when I hear who’s homes are on the auction block or who has declared bankruptcy.  Not only is it devastating on the builder, their workers, and any agents who work for or with them, it also hurts buyers who are under contract to purchase.

How do you protect yourself from buying from a builder who is experiencing problems?  How do you know?  Ken Kruse, president of Payne Family Homes - a company with 25-years of experience in the St. Charles County area of Missouri - writes about what to look for to determine a builder’s financial stability as you consider purchasing a new construction home,

First, visit several of the builder’s projects — not just the one you are considering — and note building activity. Several homes in various stages of construction are a sign the builder has the financial capacity to complete your home.

Check that entrance monuments and common areas are well maintained. Are undeveloped building sites neat and tidy?

Ask your real estate agent questions.  We talk, we listen, we like to know what’s happening in our communities.  And we want our clients to have good experiences as they navigate the home buying process.