spc

Construction Market Stirring Despite Cheap Foreclosed Property

October 8, 2009

For quite some time now, the abundance of cheap foreclosed property and unsold homes in Massachusetts has kept construction projects at bay. Developers know that they do not stand a chance against bargain-priced foreclosure houses.

But life is starting to stir in the construction market in Massachusetts. One notable market activity is the 19-acre local residential project in Cohasset. The project involves the construction of 27 luxury houses.

At the start, developers are hesitant of starting major construction projects because of the almost 40,000 unsold and foreclosed homes on the market. But they were encouraged by the recent increase in home prices, and so small development projects have started to spring up across the state.

Industry experts said that the construction market is stronger now than it was three months ago. However, they noted that the market is geared towards first-time homebuyers because of the federal tax credit, and some affluent areas where availability of houses is short.

Helping the revival of the construction market is a loan program that involves the transfer of banks’ risk from real estate developers to homeowners. Some construction companies said that demand for modular house addition and construction projects has increased by 30 percent compared with last year.

Some of these companies are using a loan program by Salem Five Bank. The loan program involves the bank’s granting of loans to homeowners and not to developers in order to offset the cost of construction. After the projects are completed, the loans are converted into permanent mortgage.

Industry experts said that there is still a lot of cheap foreclosed property that need to be absorbed before the real estate market could really recover. Because of this, they are expecting to have unusual activities as the market is trying to stand up.

The large number of unsold and foreclosed houses on the market is making it impossible for the building construction industry to revive itself. For example, a single-family house remains unsold for as long as five months.

Additionally, builders are also hesitant to look for financing for any speculative project until the market stabilizes and strengthens and the inventory of cheap foreclosed property starts have been reduced.

Related Posts:

Comments Off
Filed under category:Foreclosure Help

Comments are closed.

corner