Home Building: A Shaky Future?

By John McGory

With the demise of the home building industry, a fundamental change in how we house people is facing our country.  The Real Estate Swami says the economic meltdown may usher in a new era in how we build and pay for housing in the U.S.

Sales of newly built homes, which peaked at 1.3 million units in 2005, are running at an annual rate of just 298,000 units in 2011 and are on pace to post the lowest count since record keeping began in 1963.  

Home building starts in central Ohio’s seven-county region totaled 600 through July 2011.  In the late 1990s, it was not uncommon to see 600 permits per month in the City of Columbus. 

 This staggering drop in new housing is chasing builders, large and small, out of business.  The Swami says that home building as we know it today may never return

“Central Ohio’s impressive home building industry is but a shell of what it once was,” remarked the Swami.  “In what form it returns when housing is needed is a question not yet answered.”

The Swami says the real estate meltdown shows where home ownership and the new economy have diverged.

He predicts the speed of the new economy will challenge home ownership and 30- or 40-year mortgages.  These challenges include:

1.   Worker skills necessary today may be useless tomorrow.

2.   Middle class jobs are disappearing.

3.   Companies flourish for a short period of time, then wither away. 

4.   Governments struggle to pay their bills and maintain necessary services.

“These are signs of a troubled day-to-day economy,” remarks the Swami.  “How can a home owner sign a 30-year mortgage under such uncertain circumstances?  How can communities afford services for suburban-styled development with this short-term economic mentality?”

The Swami foresees changes such as hybrid ownership/leasing arrangements, larger multi-family housing projects and the halt to sprawling development in rural areas.

“Significant changes in society took place during the last Great Depression.  How we live amongst one another will be one of the major changes we face as this economic malaise slowly comes to an end,” says the Swami.

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