Builders feeling the pinch
Summary
This article that I read was about the Canadian housing industry and how it is suffering in its second consecutive years. The demands for new houses are declining and as a result the housing industry has taken a dip and profits are expected to be down by 3% from last year. Also the costs of materials have grown at unprecedented rates which have taken money out of the profits as a result. It was also the first time in years which in which the economic growth had surpassed the growth of the revenue. Furthermore the pace of building new houses has greatly exceeded what the demographics and economic growth can support. These high costs will continue in the industry. Aswell labour is scarce and expensive and although lumber prices are still cheap other materials such as steel and concrete are expensive and costly to transport.
Connections
The connection between this article and the chapter we studied is the inventory of a building company. If they were to build a house they would need alot of materials and because of the high costs of steel and concrete the gross profit will decrease. Also because of the high costs of steel and concrete it also increases the freight-in costs. To conclude the freight-in costs decreases the gross profit and will probably create an increase in for new houses currently being built in Canada.
Reflection
I think that the prices of houses are to go up for the following years because the freight-in costs will be sure to go up which might most likely decrease the profits in this industry. Also I think the prices will go up because the housing industry might want to try to increase their profits so that they can meet a certain trend between the years or a certain standard. I'm sure this will reduce people's interest in the housin industry because I don't think people want to buy expensive new houses when they can buy older houses at a cheaper price, many certainly wouldn't.
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2 comments:
Hey Kevin!
It's Betty, the one who sits next to Jaron =)
I agree with your reflection for when the Olympics arrive, many families or individuals would like to purchase houses in this area. Although with the Canadian dollar going down along with other factors, housing prices will sadly decrease as well. In fact, it already has and with Canada currently succumbing to a recession, I can see how the prices of houses are going down. Hopefully when we slowly emerge from the recession, housing prices will go back to a reasonable price and allow many more individuals to have a shelter.
Kevin,
I agree with your statement that houses prices will continue to go up at a steady rate for the next couple of years. Even so more with the Olympics in 2010. Housing prices will probably continue to go up since Canada's population and immigration rate is also decreasing, meaning that there will be an even larger decrease in workers. But if the prices continue to rise like they are now people would probably go for cheaper which would probably equal less people in large cities.
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