urbanexus

As Mortgage Securities Disappear, What Will Replace Them? [Housing Tracker]

Bank Stocks Drop Anew Amid Worry Over Falling Home Prices

The recent price cutting of foreclosed properties held by financial institutions is good news. If individuals and investors continue to acquire these homes -- as now appears to be happening in Southern California, Las Vegas and Phoenix -- the overhang of foreclosed properties may be liquidated more quickly than previously anticipated. Once that happens, the residential markets can move toward recovery -- at lower price levels.

The big question is when lot pricing will recover to levels where creating new improved lots makes economic sense. I don't have the answer to that but it may happen more quickly than many people think.

Production home builders are getting their direct costs down into the high forty dollar per square foot range -- for smaller product than typically built in recent years. The lower direct costs will, at least in part, offset the lower retail house prices, leaving room to pay for fees and lot improvement costs and ultimately generate some residual value to land.