Builders and banks are in direct competition with each other right now.

I believe construction lending is extra tight because banks are trying to constrict the supply of new inventory to shift buyers into the bank’s foreclosed inventory.  CNBC reports 14% of homeowners and 6% of investors will not consider buying foreclosed properties because of the hassle and time and risk associated with buying from banks.  Banks don’t want to drop their prices, so they can exert their power by restricting supply of inventory.  They do this by limiting the number of foreclosures released onto the market, and by limiting the supply of new construction by clamping down on construction lending.

This is an interesting phenomenon because while quantity of foreclosed inventory varies radically based on local market conditions, lack of construction financing is a national problem.  The result is areas like Dallas cannot add new supply because there is virtually no bank financing for builders.  However, Dallas does not have a back log of foreclosure inventory like Vegas, Detroit, Phoenix, etc.  In fact, Dallas is experiencing a population boom and an artificial restriction on new supply.  Let’s see…Dallas has an increased demand for housing and a restricted supply of new inventory because of national banking policies. Does that seem like an opportunity for anyone?

Consider buying new construction homes in a market like Dallas where there is very little supply coming on the market.  Consider being a private construction lender in a market like Dallas where there is buyer demand, but no supply of credit for builders.  Interested?  Give me a call.

David Campbell
Real Estate Investing Strategist
Office: (866) 931-9149 Ext. 1

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