Normal housing markets are like stars aligned.

Normal housing markets are like stars aligned. They’re hoped for, or wistfully looked back upon, but hardly ever present. Three such stars home builders need for new-home markets to function sanely are fundamental demand, building lots, and capital to put in place. This analysis will look at one of those stars, access to capital, which has tripped an inflection-point wire and kicked into alignment with at least signs of fundamental demand.

This past year plus, a few buyer types in a couple of dozen submarkets jumped on rock-bottom interest rates and prices to trade ready cash for impressive value in new residential properties. Those buyer types could mostly be described as cash-flush, well-to-do opportunists who were unencumbered by the need to leverage the sale of a current property to pounce on what they wanted. There were enough of such buyers to signal a trend, which telegraphed a movement, which sparked systemic encouragement that housing’s healing and full-recovery were nigh.

One condition that held back recovery, however, was that even though both household and business balance sheets had made great progress in clearing mountains of debt and distress, and even though prospective home buyers had begun to clamor for new-home options, the housing lending complex–whose most noteworthy players include nationals and heavy-hitting regionals like Wells Fargo, Bank of America, Citi, J.P. Morgan, U.S. Bank, Regents, M&T, Cardinal, Union Bank, Bank of the West, and Texas Capital–needed more time before they kicked back into gear.

They needed more time partly because of the widespread value destruction in AD&C commercial lending that had occurred in the mid- to late 2000s, partly because they needed to clear through their own business and balance sheet issues, and partly because regulators under the name of Dodd-Frank were dickering around with new policy, and amping up the uncertainty that goes with doing business.

So, now we’ve begun to see signs of a tipping point for home builders who need access to either enterprise/entity financing or some form of project financing that will allow them to purchase land, build the land into lots, and then build homes on those lots so that they can be sold to home buyers.

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