Feet On The Street – When Music Fests Impact Home Sales – A Harsh Construction Reality
In Part 1, we exposed the shocking escalations in construction costs that developers are grappling with. Now in Part 2, we explore the declining sales, local factors, and how pivoting business models may be the key to making it through this crunch.
Interest Rate Woes
Sharp interest rate hikes have severely impacted and slowed sales of newly constructed homes across markets, including our client’s beautiful golf course community with homes starting in the mid-$500,000s. Many would-be buyers have been priced out, while those who can qualify are holding off until after the November election results.
Unlike past down cycles, at least this time around, homes don’t have to be re-sold due to buyers no longer qualifying after going under contract.
When Coolio Doesn’t Sell Out
One totally unexpected factor crippling sales? A decline in local music festival attendance after decades of strong growth.
This project’s primary buyers are short-term rental investors, so slumping ticket sales have severely impacted housing demand. It’s interesting – concert sales nationwide are at record highs, but changes in lineups have triggered a trickle-down effect on this local housing market and economy.
Pivoting for Survival.
With 14 of 20 completed homes sitting unsold since January and mounting carrying costs, incentives and effective sales strategies are crucial to closing out the project. But looking ahead, our client says:
“We, along with many SoCal competitors, are pivoting away from single-family and into multi-family construction. It’s not what we typically build, but it’s the only path that makes sense today.”
The Bottom Line
Between high interest rates, surprise local economic impacts, and intense cost pressures, this insider report showcases the harsh realities developers are facing. Maintaining flexibility and quickly adapting business models may be the only way to survive and pivot toward success.
If you’ve found this information useful but have questions, please contact me on my cell (818) 254-5823. Thank you!
Greg Norris