For many agents, clients may often seem to be too picky, always finding something that isn’t exactly right with even the newest of homes. Often, you have a client who tells you there are just too few homes to select from. When it comes down to it, the problem may not be the supply, but the price of the homes for sale.
According to a CNBC report, builders have been targeting millennials with new, slightly lower-priced brands and stripping down the models. However, the supply of existing homes for sale is near a record low, but the supply of newly built homes for sale just jumped dramatically, returning to its 30-year average. Peter Boockvar, chief market analyst at The Lindsey Group, says the gap between the two categories comes down to price.
“There was a big drop in the number of sales for [newly built] homes priced above $500,000 to the lowest since November. There was no change month over month in the number of homes sold priced below $300,000, which is the area of the market that most needs more supply.”
Nationally, the median price of a newly built home has dropped and this is the result of the mix of homes that are selling. Demand is from younger, cash-strapped buyers. Rick Sharga, chief marketing officer at Ten-X, a real estate auction company, says builders find margins are too thin.
“Some of the regulatory issues that have been put in by state and local governments, some of the capital constraints that the independent builders are facing, the labor shortages in a lot of markets, have all conspired to make this a very difficult recovery for new-home builders.”
Permits to build new abodes, housing starts, and the number of new homes completed dipped in April from the previous month, according to the seasonally adjusted numbers in the latest residential sales report. The report is jointly released by the U.S. Census Bureau and U.S. Department of Housing and Urban Development.
Another sign the problem comes down to price: Inventory is high when builders are still below normal production levels. Ralph McLaughlin, chief economist at Trulia, questioned just when the market would look normal.
“If we compare the share of new-home sales to total sales, that share needs to more than double. In April, new-home sales made up about 11.9 percent of all home sales, which is a little more than half of the historical average of 23.6 percent.”