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Tax credit boomlet spurs unlikely speculators - home builders

Posted by Scott Van Voorhis February 10, 2010 09:25 AM

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If nothing else, this looks like a pretty big gamble.

Banks are preparing to dump millions of already foreclosed homes on the market while new mortgage defaults are still soaring.

Yet builders are rushing to build new homes on spec to meet an expected spring rush by tax-credit-armed, FHA-backed home buyers.

It's intriguing news from an industry just recovering from a near death experience in the wake of Great Recession and the global financial crisis.

Nor is this just some Sun Belt phenomenon. As I've reported previously, there has been a modest uptick in new construction in some towns along I-495.

As always in real estate though, how big a gamble we are talking about depends on the market.

A survey by a California consulting company finds there are now, on average, three finished and unsold homes per community across the country, a modest comeback from November, when the number of new homes fell to a nearly 40-year low, the Journal reports.

The story cites home builders in Texas and California who are rushing to get a limited number of new homes up and ready for sale in time to meet an anticipated spring rush.

There's been a modest uptick in construction in some of Boston's outer suburbs as well, with local builders putting up single family homes in towns like Groton, Westborough and Stow.

Some of that also appears to be on spec, with the homes downsized to meet demand in lower price ranges from buyers relying on tax credits and FHA-backed mortgages.

It's hard to argue against new construction in a market like Greater Boston, which, as we all know, has lots of aging, overpriced homes in need of work.

The gamble, of course, is whether we will see another round of tax-credit-fueled buying in the spring. The concern is the tax-credit-driven jump in sales we saw over the fall simply stole from future demand.

Given the mixed signals we are seeing in the market, it's anyone's guess.

This blog is not written or edited by or the Boston Globe.
The author is solely responsible for the content.

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Scott Van Voorhis is a freelance writer who specializes in real estate and business issues.

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