Home building stays flat in Boston
In spite of record-low mortgage rates, new home construction in the Boston area remains flat as a result of the recent economic downtown. Earlier this year, The Boston Globe reported that the number of permits requested was at its highest level since 2005, though the number requested was only about one-third of what was filed then. But since then, several factors have contributed to a decline in the number of new construction permits:
- Economic decline: Though the jobs outlook was promising in February, the increase in unemployment claims over the past several months and a decline in permit requests now leads experts to fear that 2011 actually will end up being much worse than they thought.
- Foreclosures and short sales: The fact is that many buyers can invest in property built in the past 10 years for a fraction of the cost of a new build because of a flood of foreclosures and short sales on the market. The Boston Globe also reports that new homes carry a 23 percent price premium over an existing home.
- Loan requirements: Potential buyers now come up against a new set of requirements as banks subject their financials to additional scrutiny. Many also ask for larger than previously normal down payments to ensure the homeowners have a larger stake and are less likely to default.
- Incomplete deals: As the old saying goes, it’s not over till the fat lady sings, and many deals fall through because of low appraisals or because potential buyers can’t unload the home they already have in order to trade up to a new home.
Whenever selecting a highly home construction company, check references, insurance and bonding, and licensing. If building a custom home, make sure to get estimates from three builders and ask specific questions about their building materials and solvency. If possible, hire an independent contractor to help you sort through the information.