Who's buying all these big new homes?


That's what someone at work asked me last week -- lots of big new developments of big new homes (plus new retail and commercial properties) around Tulsa at a time when our economy is said to be in rough shape. "sendoff", posting here on the TulsaNow forums, has an interesting bit of info that may give us a clue:

I'm not trying to be glib here, but I think the developer's/builder's vested interest is primarily themselves doing well. It's the nature of the beast.

In the Tuesday Tulsa World there was the monthly report by the Home Builders Association (HBA) on Tulsa area new home starts. It mentioned the inventory of existing $300,000+ homes (the "gravy" business of new home developers and builders) is at a 19-month supply. To contrast that with the Minneapolis area, which has not seen the degree of economic downturn Tulsa has, inventory of the same is at a 4 1/2-month supply - which is close to the national average. I'm sure similar numbers exist relative to other price categories.

So indiscriminate building and development in a weak housing environment is good? For whom? The Tulsa area or the developers?

What will happen when interest rates rise (and they will, regardless of who wins the White House) and home buyers of both new and used homes decline? Think what the housing inventory will be like then.

The cost and price appreciation of existing homes in the Tulsa area is being artificially held down because developers/builders are allowed to do their thing without restraint or any real growth planning. They make money, our homes do not.

And strategically placed water lines only make the situation worse.

It's still hard to understand how the builders and developers can make money in a situation like this.

UPDATE: A friend in the real estate business speculates that builders are taking advantage of low interest rates to build these homes now, before the price of materials rises any higher, in hopes of selling them when the economy comes roaring back. Many of the customers for homes in this range are professionals with a significant liability exposure, and the home (often purchased for cash) becomes a shelter against lawsuits.

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This page contains a single entry by Michael Bates published on October 25, 2004 2:41 AM.

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