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 Katrina Shockwaves Affects Real Estate Industry (Part 2)
By: Darin "Sid" Cameron, CRS
Tue, Sep 13th, 2005 10:18 pm

Two days ago we looked at the impact Hurricane Katrina was having on the real estate market and construction costs by creating supply and demand issues.

Looking Forward…

If you have a new construction home already under contract that is less than 1/2 finished, forget what your builder has previously told you and expect delays. It’s inevitable. If a builder can’t get access to building materials, then they can’t keep a home on schedule- and all signs point to eventual material shortages over the upcoming months.

How this will ultimately affect existing home sales remains to be seen. Long term building supply shortages could create a temporary shortage of new construction homes, forcing more buyers into existing homes (increasing existing home prices). However higher construction costs could also damper the rehab business- making it harder to sell some existing homes and driving some first time buyers, who tend to want updated or new homes, out of the market.

The impact higher fuel prices will have on the economy also remains to be seen. Could we see a slowdown of people upgrading homes? Will people want to be closer to work- slowing down sales on the edge of town and increasing sales closer in? Will higher heating fuel costs cause consumers to seek out energy saving devices that change the way we build homes- such as implementing solar or other technologies?

Worst Case Scenarios…

Although not likely, a sudden spike in material prices combined with long term shortages could push some builders with lots of pre-sold homes into bankruptcy as profit margins erode away. The industry’s worst enemy, however, would have to be long-term price/supply uncertainty. Uncertainty is what keeps the smaller builders and rehabbers on the sidelines. Not being able to accurately project costs also tends to force larger builders to be conservative and take on fewer projects. A local decline in housing starts by just 5% could be detrimental to a local economy- regardless of what is happening on a national scale. A building boom in the Southeast doesn't translate into a booming economy everywhere else.

Again, these are the doom and gloom projections that we don’t need to worry about just yet. However it’s going to be interesting to see just what happens to prices and availability down at the local Home Depot and Lowe’s.

Referenced to write this article:

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Darin "Sid" Cameron spent 15 years working in the technology industry which in 1998 relocated him to St. Louis. In 2004 he took over web development tasks for Kimberly's real estate team and later became the full-time Marketing and Operations Director in 2005. In 2011 Sid launched two brokerages, The Realty Store, Inc. and Realty Referral Partners, Inc, while continuing to perform marketing and operations for Kimberly's team. Sid holds a real estate broker's license in Missouri, CRS certification and was the first CyberStar in the St. Louis area.
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