Right now there are two camps concerning the rising cost of new construction. The conspiracy group is alleging that builders are holding back inventory to increase prices. The confidence group states that this is a temporary bubble of recovery and that builders are build a responsible amount of inventory and this will prevent a market crash.

This month the National Association of Home Builders sentiment index was over 50. Reading above 50 indicated that builders consider sales strong.

Inventories of new construction are down over 10% from the same time last year. Give the current inventory and rate of sales, the current market supply is under 5 months which indicates a seller market.

Builders are reporting shortages of labor, land, and building supplies. Many trades people that builders rely on have moved on to other sectors of the economy to find employment. Developers were not developing land that wouldn't sell.

Home affordability has been a direct result of the Federal Reserve quantitative easing that produced unsustainable low interest rates. Everybody knows that these low interest rates will not last long and will increase. Only a few people on the Federal Reserve board know when.

I tend to side with the confidence group. Sure builders want to sell the house for a much money as they can, but they don't want to get caught with inventory when interest rates increase. If you or your clients are considering buying a new home I would encourage it as the inventory is decent, the prices are probably lower than they will be in the future and the interest rate are predicted to increase

Joe LaVallie
The Integrity Team
Mortgage Banker
HomeStreet Bank
22001 66th Ave W
Mountlake Terrace WA 98043
NMLS ID#111363
joe.lavallie@homestreet.com
425-678-7604 Direct
1-800-761-7788 ext 7604
206-743-4722 Cell
Fax 206-512-1911
To Apply Online http://www.homestreet.com/jlavallie
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