The Fresno Bee recently reported that Beazer Homes pulled out of the central San Joaquin Valley. Beazer cited the decline in sales activity along with the overall decline in prices year-over-year. As a homeowner reading this story, it is easy to think it is a negative assessment of the market. I think just the opposite. When the market was going crazy in Phoenix and Las Vegas three to four years ago, new builders were entering the market left and right. They would often cite 6000 new jobs per month or some other figure, yet they were building enough houses for all of those people to own several houses each. When national builders pull out of a market, it is good news for local builders as well as homeowners looking to re-sell their homes (less supply with demand remaining constant).
One of the problems with homebuilding companies is that they do nothing but build homes. Developers in many other real estate segments not only build apartments, shopping centers, industrial buildings, etc. but also manage and operate these properties. So for instance, if Trammell Crow Residential’s Northern California office sees absolutely no demand for new apartments, it can focus its operations on managing existing properties instead of developing new ones. Same applies for AMB Property Company or ProLogis in the industrial space.