Investment into the US Housing Market. Will the trend continue?
Even though there is an undersupply in the housing and multi-family markets, it is a temporary condition and there is still an abundance of land and redevelopment parcels for future developments.
National Real Estate Companies identify growing metropolitan & rural areas and they are reporting that there are still an abundance of large tracts of land in the pipeline. They are getting prepped for future building and securing land acquisition and construction permits. Also, with an arrival of infrastructure improvements in the upcoming bill to be passed by congress, upgrades to things like drainage, roads, fire/water distribution systems and sewage are in the works, and it encourages the future growth of new home and multi-family construction.
Developers love investing in land with the promise of upcoming projects. Since there are few bidders, there’s superior pricing to be had. Real Estate companies buys in all cash for unleveraged returns and looks two to three years out at their land portfolio, while preparing for construction and increased inventory.
Traditionally Wall Street has penalized homebuilders for the carrying cost of land and investors have worried about not getting current income. Depending on where you are on the cycle there will be cyclical downturns. But the housing market’s present needs has led to creative new strategies, including working with firms to get land approved that is ready to meet housing demand quickly.
The recent desirability in investment in home-builder stocks, and the consistent increase in their stock evaluation, has verified and given confidence in the passive investor to seek Home Builder portfolios. All the large national home builders continue to be very strong in terms of delivering housing even with the undersupply environment.
One reason is that despite increased materials costs, homebuilders are benefiting from the higher prices buyers are willing to pay in the crunch. They continue to raise prices more broadly which are well beyond lumber & material inflation. Also, there is much consensus that by 3rd quarter of 2022 we will see the elimination of the supply chain issues and inflation under control.
With the Covid-19 pandemic creating more work-from-home and hybrid-work models, there’s early proof people are reconsidering urban lifestyles and decamping for the suburbs or lower cost, less centrally located cities. This allows national and regional home builders to look for land in areas where they can build housing to follow these trends, avoiding premium costs while taking advantage of strong customer demand for housing.
“Whether it's short-term, or mid-term, or long-term, the homebuilders need the support staff and consulting groups to be able to provide developed land for future development. There seems to be the inventory of land available, which will eventually equate to more projects & development in the pipeline.
In closing, investment in development and home building companies still does not disappoint. They can provide above average returns without the volatile ups and downs that the stock market can nervously create. Trends indicate that developers and home builders will continue to be creative and find land to develop for future inventory. With the presents of low inventory and buyers demand still very much apparent, strong financials and high yields will remain in place for the foreseeable future.
It's time to invest!
Check out website for Royal Swiss or call 302-990-3078
Check out website for Pinnacle Real Estate or call 484-359-004
