Definition: New home builders have been hit hard by the recession. New home completions were at a record low in 2010. Only 506,000 homes were built. This is 30% lower than the 1.7 million homes built at the height of the housing bubble in 2006.
It is easy to see why some blame overbuilding by new home builders for causing the housing bubble that led to the recession. By August 2006, housing prices had dropped for the first time in eleven years. The number of homes sold dropped to 6.3 million, and inventory rose - partly thanks to new home builders.
Why didn't they stop building? Most home builders, such as KB Homes, Pulte and Centex, are public companies. They must increase earnings to drive up stock prices. Stock investors would not reward home builders that stopped building to avoid a bubble. So, to some extent, capitalism and free-market enterprise was partially to blame for the new home bubble.
