Tuesday, January 19, 2010

Building Has Stalled as Prices Drop

New home prices are so depressed that builders continue to find it unprofitable to build.

Analysts say that if builders could acquire finished lots, that might help. But banks that own these mostly foreclosed lots that are building-ready also are reluctant to sell them because prices are so depressed.

Tax rules that are allowing builders to claim a profit in 2009 aren’t going to be much of a help in coming years because they only allow companies to write off losses against profits for five years. Many builders haven’t had a good year since 2005.

The upshot, according to many analysts, is that despite signs that real estate is rebounding big builders aren’t able to climb out of a hole and continue to hold construction to depressed levels.

Source: The Wall Street Journal, John Jannarone (01/18/2010)

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