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Housing Market Competition

Lotteries and IPOs

Written by Brian Hicks
Posted May 1, 2013

Competition in the housing market is rising at an alarming rate, leaving many who have vested interests in the industry feeling ecstatic about what the future may hold.

And while the market has shown signs of promise for months now, a new set of information is helping to push American housing in an even sturdier direction.

housing on the riseAccording to CNNMoney, a building company called O’Brien Homes has begun holding a housing lottery on a monthly basis in order to fairly allocate 228 units in a new Sunnydale, CA development. The development, called Fusion, has seen such a great deal of interest from prospective buyers that the company feels as if there is no other fair way to distribute units for sale.

A spokeswoman for the company stated that this isn’t necessarily how they wanted things to go—they wanted potential buyers to have the most comfortable experience possible—but there was no other choice given the state of demand.

O’Brien Homes is just one example of the overwhelming demand and progress in the housing industry, and it is far from being the only one.

A great deal of REITs are set for their IPOs this week and next. Virginia Beach’s Armada Hoffler Properties (AHH), for example, is expecting volume of $175 million in its IPO next week, and Scottsdale, AZ’s American Residential Properties (ARPI) expects $302.5 million. Trade Street Residential (TSRE) will also go public this Friday.

A host of other real estate IPOs have taken place recently or are lined up for the near future.

Positivity in the Market

It’d be impossible to forget the slump that plagued the housing market throughout the middle of the 2000s. Many lost their homes to foreclosure, and others had to sell for rates far lower than they felt their homes were worth, thanks largely to an economic collapse that spawned high unemployment rates and a dramatic amount of deflation.

With the first quarter of 2013 already gone, however, it appears as if everything has shifted in a more positive direction.

Instead of homes going into foreclosure, building companies now have no choice but to raffle off housing units. Even builders that tend to keep a fairly low profile are having a difficult time trying to keep up with demand, which has placed a relatively long wait on projects for many in the industry.

Just a few years ago, the success of today’s housing market would have been difficult to believe, especially given the fact that the market was seeing unprecedentedly low numbers before the upturn began.

Bloomberg has reported even more good news, stating that property value has risen more than 9% above what was originally forecasted from February 2012 in 20 different U.S. cities. This marks the biggest increase in property value since May of 2006, something that has a lot of investors looking towards a bright future for the housing industry.

From an Investor’s Standpoint

Investors stand to gain quite a bit from what is happening in the housing market as of right now. Obviously, the imminent REIT IPOs will be more than worth investor attention, especially if the market continues to see the epic amounts of growth that have been visible lately.

An increase in IPOs shows that building companies and REITs feel strongly about the future, which should help to ease the minds of investors whose confidence has been damaged by years of a faltering housing market.

From an entirely different perspective, investors may want to look at the home improvement industry as an area of focus. Some of the most major names in the home improvement industry have seen their stocks increase in recent months, and it doesn’t appear as if things will be slowing down anytime soon.

Increasing stock prices can only point to the fact that the market is indeed in the middle of an exceptional period of recovery and that homebuyers are finally ready to take on large home improvement projects.

While it would be too soon to say that the housing market has completely rebounded from the fall it took just a few years ago, it’s safe to assume that things are improving and will continue to do so. The really interesting aspect of all of this will come to light as more details surface regarding REIT IPOs, as how they fare could give us a better look at where the housing industry is going.

 

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