Analysis of Argument

The following appeared in The Homebuilder magazine, a local publication with a focus on construction and sale of real-estate properties:

“According to the most recent survey of our readers, nearly 70% of the respondents indicated that they are planning to build or purchase a new home over the next 2 years. These results indicate that the growth in the construction industry is likely to accelerate in the near future. Therefore, this industry continues to offer lucrative opportunities for investment.”

Discuss how well reasoned you find this argument. Point out flaws in the argument's logic and analyze the argument's underlying assumptions. In addition, evaluate how supporting evidence is used and what evidence might counter the argument's conclusion. You may also discuss what additional evidence could be used to strengthen the argument or what changes would make the argument more logically sound.

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The report in The Homebuilder magazine infers, from the results of a survey where 70% of the respondents were planning to build or purchase a new home over the next 2 years, that this points to an impending acceleration of growth in the construction industry in the near future. This argument could be flawed, for more than one reason.

Firstly, the survey focuses on purely the dimension of demand for homes, in fact, merely the interest in building homes. This does not necessarily translate to a growth in demand if it were the case that such an interest was expressed regularly in the past few years - that would only indicate that demand for homes was consistently at a high level over the years, meaning that there may not be a need for accelerating the supply of it.

Secondly, in a situation where there is a high availability of homes that have been been built but not yet bought, the home market would already be in a state of surplus, where developing new homes may not result in them being bought. Moreover, depreciation of value of existing unoccupied homes would make new developments more expensive and unattractive to potential buyers.

Thirdly, the construction industry's prospects are also driven by similar forces as other industries. The fluctuations in the availability and prices of raw materials such as concrete influence the cost of developing new construction projects. In order to meet targets, the construction companies often pass on the effects of such changes to the buyers, who have to ultimately bear the brunt of rising prices. Therefore, in a situation where raw materials are scarce and their prices higher than normal, potential buyers may back out of expensive purchase decisions, rendering any investment in construction less profitable.

In sum, in attempting to assess the opportunity available in the construction industry, the article in the magazine fails to make some key considerations - level of existing unoccupied homes available for purchase, changes to the demand for homes over the past few years or so, and effects of other business environmental forces such as demand and supply of raw materials and other resources. For these reasons, the conclusion drawn from the survey results may not hold water.