Sales of new homes this year are on pace to reach the lowest level on record. After peaking in 2005 at 1.3 million units, the annual rate was 298,000 units in July.
New home builders are struggling to compete against existing homes and foreclosures that are selling for big discounts — a struggle that is now going on nearly five years in some markets.
Some builders are keeping business afloat by pulling back on land purchases to conserve money as well as drastically reducing their staff.
Other builders — such as Toll Brothers, known as a major builder of "McMansions" — are looking to new ventures, like expanding into urban areas by building condos, a stronger area of growth nowadays. And some builders are offering more of a diverse mix of homes to try to appeal to the largest pool of buyers.
"The market is not deep enough or big enough to support all the builders," Alex Barron, an analyst with the Housing Research Center, told The Wall Street Journal. "There needs to be some consolidation. I don't think that means [mergers or acquisitions]. I just think that means there has to be a shakeout."
Source: “Some Home Builders Run Out of Lifelines,” The Wall Street Journal (Aug. 31, 2011)
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