Monday, February 11, 2013

Homebuilders: Barely in the clear

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Although recent reports on the real estate market show U.S. home builder confidence at a six-year high, it may be too early to say the housing industry is back in full force. The country had seen steady gain in the housing demand since its record low in 2005, but experts at Forbes seem to think the industry still has a few challenges to overcome before analysts can say that the sector has recovered.

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Even with how Congress averted maxing out the national debt, the new “fiscal cliff deal,” or Taxpayer Relief Tax Act, provides a negligible leeway for credit seekers. Loan and mortgage applicants may only qualify if they managed to maintain exceptionally high credit scores– a chore that proved increasingly difficult during the economic recession. Those who do qualify for a mortgage could still be presented with undesirably high interest rates, which discourage borrowing or any purchasing activity in the real estate sector at all.

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In observing the trends, it is easy to note that real estate prices are rising faster than they’re getting sold. This is a familiar sign of another “burst” in the real estate “bubble,” such as was first seen in 2007. The symptoms are at risk of moving from residential real estate to commercial and corporate properties. Companies like Network Capital Funding have recently announced embarking on an extensive office redesign. While infrastructure improvements raise real estate value, the industry is not predictable enough to determine if the cost of construction will reward returns when the property is sold.

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