Less New Construction These Days- Why?

We’ve had questions from clients about why there aren’t many new presale opportunities:

According to a September news release from the National Association of REALTORS®, not only is the price in the new-construction market refusing to shift downward, but the inventory continues to dip as well.

Although home prices hit a low of $204,000 in October of 2010, the typical new home price has lingered around $220,000 over the last year.

According to the article, construction workers’ wages have been static over the past four years ($38 per hour on average) and the costs of construction materials have been rising. Financially, this means builders cannot lower the price of new homes without suffering a loss. Many builders are finding it better to not to build at all under these conditions.

Meanwhile, resale home prices have had to respond to supply and demand pressures. For many homeowners wanting to sell, lowering their price (often several times) has been the only viable option in order to attract buyers energized by the amount of inventory on the market.