New Home Prices Going Through The Roof!
This week let’s talk a little bit about the new home sector. Home price appreciation in the new construction sector has risen quite a bit more than the resale market for a number of reasons.
One is that buyers tired of losing out on resale homes are OK with the waiting for delivery and the higher price in exchange for the surety of knowing they are going to be getting a place.
Another is the incredible increase in the cost of most building materials. Wood blights in some countries and increased global demand are driving prices through the roof. Lumber prices are up 159% since last April, adding on average $16,000 to the cost of building a home nationally. In this region with the larger and more expensive homes you could be looking at multiples of that figure.
In national news last week the foreclosure moratorium on federally backed mortgages was extended until June. Not as big a deal as it sounds since during the same time horizon borrowers can put their mortgages into forbearance so they are in no danger of being foreclosed on. Continuing in the mortgage realm we are seeing lots of low appraisals on contracts because buyers are having to go so far over list price to win bidding wars. For some it’s not the end of the world because they can reduce their down payment without it being too penal either from an mortgage insurance standpoint or monthly payment bump, since the rates are so low. However you have to make sure you understand the risks in waiving the appraisal as you might have to do to win a house now. Call me and I can walk you through your options to balance risk and reward. Depending on the down payment amount and the area you are purchasing in you might get an appraisal waiver that makes all that a moot point.
Guess what? Inventory is still tortuously low. 1,418 homes on the market which is down 20% from last year. Of those 51% of those are condos. That means in Arlington, Alexandria, Fairfax, Prince William, Loudoun and Fauquier counties combined there are only 554 TH’s and SF’s on the market. That is crazy. If you are thinking of selling this year, it might be time to call me as this would be an incredible time to do so.
Pricing. Even in this limited inventory market owners and agents can still over price properties. The days on the market stats show this. The median days on market is only 8, but the average is 21. That means there are a good number of homes sitting on the market for a long time. Pricing at or above the “bid up” price is not a winning strategy. Price aggressively, but reasonably, and let the market and bidding competition do the work. There’s a big psychological component to it that is understandable. Most buyers correctly assume there will be multiple offers and the price will go up, so if the home is already priced way out in front of the market then they won’t even go look at it. I can help you balance pricing to maximize your net.
It’s a good life.