The past ten years have witnessed a dramatic surge in real estate development nation wide. Builders sought to take advantage of the burgeoning middle class and record low mortgage rates. While new home sales in some areas of the country are red hot, in many areas of the country a recession has slowed new home sales considerably. Anyone involved in the construction of new homes fears the word recession like they fear the plague.
As a recession begins to unfold, new home construction tends to decline as more potential buyers start saving their money as opposed to spending it. New home construction happens to be very heavily capital intensive and no home builder wants to go deeply in debt building homes only to have the homes sit around unsold. Much to the dismay of home builders, recessions are not easy to predict and there is almost no way to be 100% certain a recession is coming at all.
As a result, many home builders end up building vast subdivisions only to have the economy take a nosedive and leave the builder with millions of dollars of debt. Such an economic downturn is bad news for home builders but is great news for prospective home buyers. Home builders simply can not afford to have millions of dollars worth of homes sit unsold for months on end.
Once a recession hits home builders are forced to offer incentives including cash incentives in order to speed the sale of their new homes. Many times homebuilders will offer upgrades such as high end carpet, luxury bathroom amenities, and even finished basements. All of these upgrades and cash incentives can easily add up to savings of tens of thousands of dollars and a corresponding increase the homes market value.
Many home builders tend to build in developments that may contain hundreds of individual homes. The builders understand that if they can increase the rate at which homes are occupied in their development they can then use the rapid occupancy rate as a selling point to other home buyers.
While home builders may despise recessions, they are very often times a blessing for home buyers. Recessions allow buyers to maximize their investment, reduce their upfront or out of pocket costs, and at the same time obtain a much nicer home than they would have been able to before. Before purchasing a new home, prospective buyers should always try to negotiate with builders for upgrades and extensions. Even if there is no recession, home builders are notoriously eager buyers. Their eagerness to sell translates into increased savings and better return on investment for you.
