Better Housing Starts Numbers Show Some Promise
Posted by JimPeople who have made bundles in real development have one thing in common; they tend to think and act in the long term. Take the acquisition of land for example. Even though the environment for building and selling new homes is difficult today, the major merchant builders and land developers are now looking to acquire land.
There is quite a lead time from land contract through finishing up that model home and builders know this. Monitoring new permits and housing starts, as well and watching the Dow, is a good indicator of what smart and established players are thinking about the future market. They are not emotional about this, unlike the population of nervous buyers currently afflicting the business. These people know they need to have finished product on line in three to four years. That belief alone gives the rest of us information about how these people see their world.
Remember the advice of Sam Zell, “Look to replacement costs” or something like that. I have always been a believer in that dictum. When looking to price correctly an existing property, of any type, ask yourself what would it cost to replace it? That should be your guide to a good market price. It is all about replacement cost, no more and no less.
We have last month a positive sign in higher housing starts and permits. If it continues, it should signal a shift in the current market cycle.
