Globally there is a considerable shift in the mood of home building construction companies. From the United States to Europe and other continents across the world, the rising population and the need for urbanization seem to drive the demand for new housing. So, to meet this surge in demand, housing construction companies need to ramp up more structures, especially in areas where demand is on the rise.
Globally there is a considerable shift in the mood of home building construction companies. From the United States to Europe and other continents across the world, the rising population and the need for urbanization seem to drive the demand for new housing. So, to meet this surge in demand, housing construction companies need to ramp up more structures, especially in areas where demand is on the rise.
According to a market survey on residential housing in the U.S, one of the main factors driving optimism among home builders is that there is lesser competition among construction companies as it stands now. So, this has created a situation of high housing demand with lesser competition, leading to higher profit return on investment for building companies despite the increase in labor and material prices in recent times. This article will discuss further information on this topic, ensure to read to the end.
Comparison between the number of construction companies in 2005 and now
The information released by the National Association of Home in its monthly gauge of builders’ sentiments shows that the home building industry is getting closer to its peak of the pre-global financial crises of 2008. The report from the body also shows that despite the inflation rate, the market is strong as buyers have continued to show interest in buying despite the price increase.
So, what are the factors responsible for this positive review in housing investment? According to market analysts, the reason for the home construction industry positive review can be traced to fewer construction companies that are now lower than in 2005. Data available to the Commerce Department also support this claim. For instance, in 2014, 368,000 construction firms were operating in the U.S. compared to 530,000 in 2005. In comparison, the current number of workers in the construction industry stands at 763,000 compared to 996,000 at the end of 2005.
When you consider the present position of the number of home construction companies and workforce in the industry in 2005 and now, you should be able to get a glimpse of the present position of the industry. This twin factor has also influenced the values of residential property. For instance, in 2005, the median price was $240,900 but now stands at $316,200. So, it is safe to say that lack of competition in the industry is negatively affecting the contribution of the sector to the overall economy.
Also, another contending issue affecting the industry is the frequent clash of interest between established home building construction companies and newbies in the industry. The reason is that established companies rarely have issues having access to loans from banks compared to new companies in the industry. Another issue the new companies face is having access to land, especially if their targeted lands or attractive areas have already been allocated to established home building companies.
Final thought
With the recent position of the home building industry, it will be alright to say that shortage of building companies and lower workforce is a significant factor contributing to housing shortages and the increase in home prices. However, companies in this industry seem not to be baffled because limited companies available in the industry create room for less competition, thus leading to a higher profit margin for building companies.
Will competition return to the once crowded industry? Well, the answer to that will be mere speculation. Nonetheless, the reality on the ground is that home building construction companies are indeed having a lovely time.
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