In November, new home builders cut their production levels to the worst seen in 50 years.  Clearly, there are very few new houses being built…

…and that’s good news.

The primary problem in the real estate market is an excessive supply of properties.  As soon as the supply of available property reaches a healthy level, the real estate market will be fine again.

Therein lies the rub - there are currently 3 primary sources of housing inventory:  (1) New homes; (2) Resale homes and (3) Foreclosures.

Traditionally, foreclosures are a far less significant portion of the supply of available housing, but with the glut of foreclosures we’ve experienced in recent months, it’s become a difficult road for both home builders and people who want to sell their homes.

That’s why construction companies are cutting back their production to a huge degree.  And while this is inflicting serious pain on the employees of those companies, it is, unfortunately, something that has to happen.  Until the supply of foreclosures is depleted sufficiently that demand for housing begins to level off and grow again, it will be construction companies that take the hit.

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Some hard numbers have come out today from the Mortgage Banker’s Association that shed a LOT of light on the foreclosure data.

All that we hear is how much foreclosures are rising and how truly bleak the U.S. real estate market is.  But the specific numbers tell a different (and better) story.

It is true:  Foreclosures are still rampant on a nation-wide basis.  But consider this fascinating little factoid:

California and Florida alone account for more than 73% of the nation-wide foreclosure increase that happened between the first and second quarter of this year.

Stated differently:  If one factors out those two states, the foreclosure problem disappears by 73%.

Clearly that’s a theoretical issue as it is impossible to “factor out” markets as significant as California and Florida.  But it’s undeniably the case that the incredible weakness in those markets is drowning out the fact that the second quarter of this year saw improvements in foreclosure statistics in other important markets including Texas, Massachusetts and Maryland.

Just something to think about while the news media tells you of the “terrible condition” of our economy.

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In July, construction spending fell to its lowest level in 17 years, according to the US Commerce Department.

And that is great news because it means that the supply of available housing will not be further expanded, allowing room for more of the foreclosures currently on the market to be purchased.

The real estate market is suffering largely because there is an over-supply of houses due to a vast increase in the number of foreclosures. Because there are so many properties already on the market, buyers are free to demand highly attractive prices since there are so many more pieces of real estate than there are buyers for those properties.

So the fact that construction spending has dropped off very significantly is good for the real estate market, since construction spending fuels the building of new houses which is something that is not necessary in our current over-supplied market.

It’s one more piece of good news about the U.S. real estate market! As always, thanks for reading FreeRealEstateTraining.com.