These real questions on new home starts and interest rates on real estate are answered by a US Master Builder and myself after receiving them from readers of my e-book, "Residential Development Made Easy." Question 1.
What is
your forecast for home starts in US for next 12 months? 24 months?
Master Builder & Developer's Reply:
This depends upon where you are. New home starts are excellent for Florida, Texas, and Arizona.
What most people don't appreciate is that there is always growth in new homes. Cities grow in spurts, but there is also controlled growth. As one part of an area dies from old age it is revitalized and redeveloped.
So remember national growth statistics on new home starts are not much use to you unless you have a national business. The best advice we can give you is to "read" market data - census data etc.
Personally I have kept average residential dollar sales figures on homes for my City since 1974. At first it might appear to be a lot of work, but after you have your base, say 20 years worth of data, you only have to add one figure a year.
My City's growth dollar sales value shows a 150% increase every 8 years. It is valuable to know where you are in cycle - so it is worth doing figures.
By that I mean, if you sold a property in seventh year of cycle, you'd make about 90% profit on your 'buy-price' but by waiting one more year it becomes 150%.
Stats are important, so do homework. After all, all you got to do is get some figures from an office for FREE and put them on an spreadsheet.
Question 2.
How do changes in interest rates affect sales of first time new home, middle class, and estate housing? Aside from obvious, any interesting statistics or trends?
Master Builder & Developer's Reply:
I'll tell you a secret. The answer is that it doesn't affect new home part of housing industry. If you watch news when you hear about housing industry in a slump or slowing down -- Greenspan in on news within a few days adjusting interest rates to ensure continued growth.
The building industry is engine of our economy. If a country has had an economic slump and Government wants to kick it off again, they start by 'flicking on' on new home building industry switch.
It is quickest to react; quickest to increase employment figures which pays for groceries, mortgages, school fees - you name it. Two economists arguing will give you three opinions, but they all agree on 'economic multiplier effect.'
That means that a $100 million project has an economic effect in community of about $230 million. That is steel in building pays company who made it, who then pays wages of workers, who then pays grocer who then pays his staff, who then pay their rent, car payments and so on - it goes round and round.
