New Homes vs. Commercial Real Estate

A house, or domicile, is an artificial place used as a residence for an individual, family or group. It is usually a fully enclosed or partially insulated room and is often housed in a building with its own utilities. Homes can be built for a variety of purposes such as retirement, a vacation home or even a business office. Most homes are built by private individuals but there are homes available for lease or rent.

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There are various reasons why more people are choosing to build their own homes rather than renting them. For starters, home construction projects can cost as little as half what commercial real estate projects will cost. In addition to this, there is also less disruption to the surrounding community during a home build project. These benefits coupled with the current depressed housing market have made the move toward constructing one’s own homes a practical option. For those who wish to save money, while at the same time increasing their home equity, the purchase of an existing dwelling is an excellent investment choice.

 

There has been a marked increase in residential construction over the past several years due to the current state of the economy. Many different factors play into the housing market, including interest rates, unemployment rates, national and local tax rates, etc. However, there is one thing that most economists agree upon and this is that the number of new home sales has significantly dropped off in recent times, even though there are many people still buying homes.

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This drop off in new home sales can be attributed to several factors. One of these factors is the lack of available land to build on. Another factor is that most lenders have tightened their lending guidelines and require more requirements for financing. Lenders are also generally requiring more down payment money for new home sales. Home builders are also noticing a decline in overall consumer confidence due to the global credit crisis and are now offering much less aggressive pricing on homes. Many buyers are simply choosing to stay put rather than purchase a new home due to the overall lack of supply.

While there is some slowdown in new home starts, this does not mean that there are not homes available to purchase. In fact, the number of homes being built continues to climb and there is presently a surplus of homes on the market. Many home builders are experiencing difficulty in obtaining building permits and are having a difficult time selling these homes as they require significant renovation. In fact, there is actually a surplus of homes that need to be rehabbed, which is causing the number of new home starts to decline.

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The number of commercial real estate types also declined slightly during the past year, but then increased slightly over the last six months. One of the main reasons that commercial real estate includes properties such as apartment buildings is the fact that it typically requires a mortgage or equity loan to finance the purchase. Typically, lenders prefer to issue these loans to smaller, independent businesses that plan to use the property for only a short period of time. These small businesses often do not have the long-term cash flow required to finance large purchases like homes. In addition, the smaller business usually has much less leverage with the lender when negotiating terms.

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