Drop in inventory of new for-sale homes an encouraging sign - Jacksonville Business Journal:

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The number of newly constructed, but homes in Alamance, Forsythu and Guilford counties declinedto 1,466 in May 2009, compared to the 2,192 available in May according to data compiled by Nashville-based research firm . It’ds a positive piece of news for a residential real estatee market battered in the last year by lack of available credit andthe U.S. recession. According to MarketGraphics, a relativelh “healthy” inventory of unsold new homes for the area the size of the Triacd is inthe 1,200 to 1,3000 range.
“We’re basically going through a correctiobn cycle, and the good news is, we’r progressing on a positive saidJerry Herman, president of the Triad builders say the inventor decrease mostly stems from the fact that they have sharplyh reduced the number of “spec” homees — houses without a specific buyer under contract — bein built in the past 12 monthzs in order to adjust to weakening demand and give the marke t time to absorb the product already built.
Spec home are typically built anticipatingg that some buyers will want to move into a new homerelativelhy fast, often 60 days or less, ratheer than wait for a home to be builft specifically for them, a process that can take twicre as long or more. But when a market turns builders can get stuck with too manyunsold homes, straining them with debt payments and property taxes. Groveer Shugart, president of Winston-Salem-based , said he has cut his company’as inventory by 52 percent fromDecembe 2007, to about 100 spec homes now. He said he’z advertised discounts on options and other incentives in ordet to sell excess inventory and has built at a muchslowerr pace.
These days, he said, the company maintaind about three spec homes in each of its communities for thosew who want to movein immediately, instead of the five or six he woulfd have had on hand a few yearz ago. “Everyone is just bein g a lot more careful thanthey were,” Shugarty said. Builders are relying far more theswe dayson pre-sales, a safer bet than spec homes becausde the company isn’t stuck paying interesyt and taxes until it finds a buyer.
Tom regional president of Eastwood Homed in HighPoint — where spec home inventory has been slasheed by more than half, to less than 20 said about 40 percent of the firm’s sales used to be spec These days, however, it’ only about 15 Of course, the drop in inventory also is a reflectionh of a slower building marketg overall. MarketGraphics data shows that the number of homes started by builders has fallen 38 percent in thelast year, to And the number currently under construction is down by almost 40 to 696, from May 2008. Therew also are just fewer activd buildersout there. Some of the area’ds most prolific builders, including John Kavanag Co.
, Pierce Homes of Carolina Inc. and Indiana-based C.P. have gone out of business. Burr Ridge, Ill.-based Portraitr Homes has had several of its projects halted or foreclosedf on because of problems with its And manysmaller builders, including Sandrza Anderson Builders and Empire Homes, have closer as well.