Monday, September 26, 2011

EXISTING HOME PRICES KILLING NEW HOME BUILDERS

The most obvious reason home buyers aren't walking through builders' model homes these days is the price.  The median sales price of a new home sold in July was $222,000, according to the Census Bureau and HUD.

The median price of an existing home was $171,200 in July, according to the National Association of Realtors, an industry trade group.  On top of that, there are horror stories of new-home buyers who hit a speed bump when the appraisal is done.


Appraisals that come in lower than the cost of construction are hurting builder's chances of maintaining sales. When the appraisal comes back low, that reopens negotiations and could require a buyer to put more cash down, he says.
From an appraiser's standpoint, valuing a new home can be a challenge, says Sara W. Stephens, president-elect of the Appraisal Institute, a professional association for real-estate appraisers. When there aren't a lot of new homes selling in an area, appraisers are forced to look at the most similar sale they can find, Ms. Stephens says.
Then there's the worry about construction quality, when site builders are doing whatever they can to stay afloat. 
 
This is one area that new home buyers don’t have to worry about with modular housing.  Since 80-90% of the home is built in a factory and inspected by government approved third parties, quality and energy efficiency are built in.

Builders had to downsize and cut back and are operating on paper-thin margins and carrying too much debt, and they're trying to drop the price as much as they can to get into the market.  So you could argue that they might be cutting every corner that they can.

That said, builders are making efforts to be competitive. Many are reducing floor plans and lot sizes to shrink the price of the home.  In some cases, builders offer incentives to sweeten a deal. And they typically stand by their craftsmanship through warranties.

1 comment:

Anonymous said...

Coach:
I would like for you to visit one of the many factories and find that government approved 3rd party inspector that is inspecting each house! They approve the plans and standards but after 16 years in the industry I have yet to find that "mysterious" inspector.