Would you rather have a new home or an existing home?
Buyers in today’s challenging housing market face a unique choice. Simply put, the stubborn lack of existing home inventory and stepped-up new home construction are presenting increasing examples of new home prices competing with existing home prices.
The region’s move-up market ($250K to $500K) has seen most of the sales and new inventory activity so far this year. The $300K-$400K sweet spot is up 21.1% from last year. It has accounted for 142 of the 758 sales during the first seven months of the year.
Enter the new home market. Some of the single-family homes coming on the market compete in the move-up market’s price range. Of the 282 listings for new construction homes in the region’s major markers on Realtor.com 120 (42.5%) are in the $250K to $399K price range.
Here’s how Rick Sharga, CEO of CJ Patrick Co., sums it up. Limited inventory of existing homes is creating the housing market’s version of an inverted yield curve, and that’s turning expectations upside. Buyers who normally would buy an existing home can’t find one, so they are looking at new home inventory and asking: “for the same – or close to same – price which is better new or existing?”
National Association of Home Builders Chief Economist Robert Dietz told Real Estate News, “while new and existing homes may seem close in price, it’s an apples and oranges comparison. Buyers and their agents will find that there is a gulf between new and existing home prices.”
New homes typically offer more amenities, require less immediate maintenance and repair and are more efficient. And builders can lure buyers with mortgage rate buydowns and price cuts. But, many buyers value an older more than a new home.
Sarga’s advice is, “If you’re in a market where the delta between existing home price and new home price is nominal, I think the inclination is go with the new home since they will also likely have greater resale value than an older home. That’s music to builders’ ears.
Although new home sales data isn’t readily available on a monthly basis, D.R. Horton – the region’s largest builder – says July sales were up 8% from June (39 sales) and year-to-date sales are up 103%. Nationwide sales are up more than 30% from last year. Still, the outlook is for a potential slowing later this year. Builders have been cutting prices or offering incentives, a trend that will probably increase.
NETAR is the voice for real estate in Northeast Tennessee. It is the largest trade association in the Northeast Tennessee, Southwest Virginia region, representing over 1,600+ members and 100+ business partners involved in all aspects of the residential and commercial real estate industries. Weekly market reports and information for both consumers and members are available on the NETAR website at https://netar.us