Lennar just one more victim of the housing slump
The nation’s housing slump has hurt a lot of people: real estate agents, home sellers, landscapers, home inspectors, home-improvement suppliers … This real estate crash has been devastating.
But few have suffered as much as have the nation’s homebuilders. I live in Chicago. I’ve seen venerable builders such as Neumann Homes and Kimball Hill Homes go into bankruptcy and out of business. There just isn’t much demand anymore for new homes.
Now there’s the news, as reported by Bloomberg.com, that major homebuilder Lennar Corp. reported its seventh consecutive quarterly loss. The company said that record job losses and the rising number of foreclosures have significantly cut into demand for its new houses.
It’s little wonder that Lennar is struggling. It seems as if every home builder in the country is doing the same. According to the U.S. Commerce Department, the sales of new homes fell in October to its lowest point in 17 years. In November, home builders broke ground on the fewest number of houses since the Commerce Department has kept such records.
At the same time, a record number of U.S. homeowners have either lost their homes to foreclosure or are in serious danger of doing so. The Mortgage Bankers Association says that in the third quarter of this year one in 10 U.S. homeowners fell behind on their mortgage payments or were in foreclosure.
With so many people losing their homes, there is little demand for all those newly built residences filling subdivisions across the country. Home builders, like everyone else, got caught up in the euphoria of the 2001 through 2006 housing boom. They overbuilt. They built subdivisions located ever farther from major metropolitan areas and their jobs. During the housing boom, this was fine; Everyone wanted to buy a house. And, it seemed, few buyers hesitated at the escalating cost of these new homes.
That has all changed today. Today, housing prices are falling across the country. Sellers are watching as their homes sit on the market for months without any serious offers. And a growing number of homeowners are shocked to find out that their residences are now worth less than what they originally paid for them. These are certainly not conditions conducive to the purchase of new-construction homes.
The only bright spot is that maybe home builders, and the rest of us, have learned a lesson from this tough real estate slump. Maybe we’ve learned not to overbuild. Maybe we’ve learned that housing prices can’t keep escalating at historic proportions forever. And maybe we’ve learned that a house is not only an investment, not only a way to make some quick cash, but is also a place to live and raise a family. Houses weren’t designed to be bought and sold for high profits every year or two. They were designed to be lived in, for many years, and then sold for a respectable profit.
Some of the real estate agents I’ve spoken with tell me that this real estate slump is necessary. It may be painful, but it should lead us back to a more normalized housing market. Let’s all hope they’re right.
