Construction Factoring For Building And Development

Between the years 2001 and 2007 development loans and mortgages at low interest rates were easy to come by

. Most investors were optimistic, causing the emergence of new developments of homes, office buildings and shopping centers globally.

The real estate and construction sectors comprise one of the larger components of the global economy. By the year 2008, the residential real estate sector was dismal worldwide.

In 2009, the U.S. Bureau of Labor estimated that about 6.0 million Americans were employed in the construction industry, which was down from 7.2 million in 2008, and 7.6 million in 2007. The agency also estimated that 1.4 million Americans were employed in the real estate industry as of 2009, and this too was down from 1.5 million in 2008 and down 1.5 million in the year 2007.

In early 2010, real estate started to improve in some markets in the U.S., plus there was a significant boom in other global spots like China and Canada. Overall, about $846.2 billion in new construction was put in place at a seasonally-adjusted annual rate as of February 2010, said the U.S. Bureau of the Census.

Now, there are a number of trends that will shape the real estate industry in the future, and one of them is the use of construction factoring among contractors and developers globally. Construction factoring is a safe alternative to standard commercial construction loans. Used in the construction industry for years, the recent economic downturn and tightening of the credit markets has been especially hard on the construction industry, so contractors are experiencing cash flow problems as they also must face many new sustainable building code standards.

Construction factoring allows businesses to obtain funds based on their current accounts receivables, and it is these advances of funds against invoices that will provides enough cash to pay the bills. Due to the fact that mortgage debts are at higher levels than what the underlying properties are worth, it could be challenging for home owners. America's residential housing markets were hardest-hit in the category of high rise condominiums, where new projects far exceeded potential demand by consumers.

But research analysts in the building industry are predicting that as business gradually picks up, the bottom will be reached eventually in almost all markets, and in so far as real estate and construction is concerned, home sales may rebound by the years 2011 or 2012

Commercial real estate now indicates that major development projects have been either canceled, or downsized, therefore the commercial property investment sector remains slow. In many U.S. retail shopping centers as well as office vacancies are high. Therefore, commercial mortgage delinquencies and foreclosures will continue to be a problem, and funding for speculative commercial projects will continue to be very hard to acquire. The use of construction factoring in the coming years, will help guarantee stability.

Source: Plunkett Research, Ltd. and the National Association of Realtors.

by: Kristin Gabriel

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