Real estate home pricing...

[Cuda1447]

Let's have a discussion about real estate pricing and where we think it is headed/why. The wife and I are looking for a new home and have listed ours on the market. We have put in an offer on new home construction, but have become a little jaded by the process. First of all, to my huge surprise, new home pricing seems to be going up... quickly. There have been numerous price increases in the past few months at almost all new home subdivisions in my area (Florida). Additionally, they have been very difficult to deal with. Not wanting to give any concessions and basically demanding what they want because the 'demand is so high'.


Now perhaps I'm just green to this process. But this seems ludicrous to me. I am very surprised demand is so high, as I was under the impression the economy really hasn't improved much yet. Further, there still seems to be a ton of foreclosure, shortsale and pre-forclosure on the market. Now I realize there isn't a great deal of your typical resale houses on the market and that makes it more difficult to get something, but you would think the new home pricing would still have to be competitive with the shortsale/foreclosure market.



Part of me thinks we are just in a short term bubble and that the way these new home builders are acting is ridiculous. But another part of me is just slightly perplexed because all of the new home builders I have talked to seem to have the same attitude right now, which makes me think I am wrong.


Anyone have thoughts on the subject?

 

[Vdubchaos]

Stay away from "those kind" of builders.

Also inspect the house not only right before you buy....DURING construction. Lots of SHADY builders out there that do sub par work!

 

[Capt Caveman]

Region specific. Where I live there is no inventory. Small 3 bedroom townhouse, listed for $549k sold for $639k. Neighbor has a 2 bedroom townhouse, bought it for $449k 5 years ago, listed it last month for $549k and went under agreement in 3 days with multiple offers. I'll find out next month when they close how much he got for it.

If you think the pricing is inflated, why aren't you interested in non-new construction?

 

[Fern]

-snip-
Now perhaps I'm just green to this process. But this seems ludicrous to me. I am very surprised demand is so high, as I was under the impression the economy really hasn't improved much yet. Further, there still seems to be a ton of foreclosure, shortsale and pre-forclosure on the market.

There should be a Board of Realtors in your area. They produce statistics on number of homes sold, ave price, average time on the market etc.

You may be able to find it on their website. The Chamber of Commerce usually gets it too. They may give you a copy.

You might want to get a few years worth of data and see what's really going on.

Fern

 

[Cuda1447]

There should be a Board of Realtors in your area. They produce statistics on number of homes sold, ave price, average time on the market etc.

You may be able to find it on their website. The Chamber of Commerce usually gets it too. They may give you a copy.

You might want to get a few years worth of data and see what's really going on.

Fern

Good suggestion, I'll look for that. Thanks

 

[rcpratt]

I had similar thoughts when we were considering buying our new condo last June. The price was the price, and they were very up front about when prices would be going up (and it was quickly).

Our result - we purchased very quickly, a bit earlier than we wanted to, but the base home price is up 15% since we bought, and would probably be up more except the development is finished.

 

[mshan]

I remember reading Toll Brothers saying that when they increased prices it just increased traffic and contracts.

People may be thinking train is leaving station and they have to hurry to get on, which may or may not be true (region specific, as mentioned above). e. g. this seems to be true in NoVA area (commute into DC), where housing prices are always high, corrected somewhat, and now that Brian Williams or other nightly news talking head has said housing market has bottomed, people are again fearful of getting priced out of market and generating some near term froth in purchase prices.

New home prices may also be going up because some builders can't find enough skilled labor, so it is taking longer to build house now (higher cost that they have to pass on).

Macro issues seem to be subsiding (except perhaps for overly tight credit for many) and you need to focus on local economy, local job growth, local inventory, and local new builds. And of course take a long term time horizon (at least 5 - 7 years living house, maybe).

IMO, house should be a hedge against inflation (continually rising rent) that you get to live in and enjoy, rather than a get rich scheme like during bubble years.


http://video.cnbc.com/gallery/?play=1&video=3000152733 (start at 57 second mark and note distinction between nominal purchase price and affordability (i. e. monthly payment relative to total income) as metric most buyers may use)

If there is a particular (national) builder that is listed on stock exchange you are considering buying a house from, google for their earnings report and specifically try and listen to conference call when they talk with investors. May get a better take on what they see different local markets as from their point of view.

Hopefully, there will be a temporary mild slump in stock market and tempered bullishness of economic news this summer as sequester kicks in (Fed starts to indicate it is tapering Quantitive Easing because economic recovery appears self sustaining and has shifted into higher gear (2.5% - 3% GDP growth later this year), but stock market pulls back temporarily because easy money is being tapered away and economic data is not as good as it could be because of austerity due to sequester. If you really want to buy, do you homework now, and be prepared to pounce when others are fearful.

Good luck!

 

[spidey07]

You're in florida, the gut of the housing market.

It makes ZERO sense to build new in FL, new home prices are significantly higher that what you can build for. This is the same in many/most markets, why would somebody buy a new home when they can get the same thing for much less?

New home builders can't get around the cost of material and labor. They are making a gamble. There's a subdivision near me and they can't give the homes away because the cost they have in building them is WAY more than the home is worth from a buyers perspective.

The price of the house is what the buyer will pay, and nothing less. Doesn't matter what the builder/devloper spent on it.

 

[mshan]

Yeah, Florida was really overbuilt (speculative), and unlike past, I believe Florida is now experiencing net exodus of new residents, not influx like they have benefited from over last decades. Shadow inventory also appears to be significant issue there:

http://www.realestateconsulting.com/blog/adam-artunian/bring-down-gavel-judicial-foreclosure-process





vs. California:

http://www.realestateconsulting.com/blog/admin/you-cant-argue-math-inevitable-rebound

 

[Greenman]

It's pretty simple really. They are going to charge whatever the market will bare. If sales on the first few were brisk, then the price is going up.

 

[spidey07]

It's pretty simple really. They are going to charge whatever the market will bare. If sales on the first few were brisk, then the price is going up.

The price of the home is what the buyer is willing to pay and nothing else.

I've seriously considered buying a vacation home in florida for like 150k. You can steal homes down there right now.

 

[Cuda1447]

You're in florida, the gut of the housing market.

It makes ZERO sense to build new in FL, new home prices are significantly higher that what you can build for. This is the same in many/most markets, why would somebody buy a new home when they can get the same thing for much less?

New home builders can't get around the cost of material and labor. They are making a gamble. There's a subdivision near me and they can't give the homes away because the cost they have in building them is WAY more than the home is worth from a buyers perspective.

The price of the house is what the buyer will pay, and nothing less. Doesn't matter what the builder/devloper spent on it.

Well I wanted to buy resale, but a few factors have influenced me to look at new build. This particular house I am getting for $85 per sq. ft on a nice size lot (relatively speaking). For comparison, my smaller home on a smaller lot is being listed for around $94/sq ft. It seemed like a good price. Additionally, non-short sale/foreclosure homes are very few and far between around here. Short sales aren't a good option for someone looking to sell/buy at the same time, as it's very possible to be waiting on a short sale for months, or longer. That doesn't work if I have a buyer on the hook for my home sale.

 

[spidey07]

I see what op is getting at. They're playing the emotional angle.

New = better
More expensive = always better

The buyer still has all the power in that market and most.

 

[mshan]

Builder may be able to offer credit (mortgage) to buyer who won't otherwise qualify for mortgage from more traditional source?

"In general lenders have been willing to do more than they may have been willing to do in the past," said John Forlines, chief credit officer for Fannie Mae's single family business. "Our requirements have not changed significantly, but other parties taking risk, the lenders and mortgage insurance companies in particular, have been more flexible than they may have been in the past."


http://homes.yahoo.com/news/no-cash--no-worries--home-lenders-ease-up-rules-193804515.html

I think more traditional lending sources are worried about liability if mortgage they make goes bad and is forced back onto them (?)

 

[sdifox]

New houses tend to be shitty. And it doesn't matter which price bracket you are in.

 

[Cuda1447]

New houses tend to be shitty. And it doesn't matter which price bracket you are in.

Uh... why is that?

 

[sdifox]

Uh... why is that?

Because they can get away with it. Ever since construction workers became contractors as opposed to hourly employees. They can either do 30 house properly, or 50 more or less jobs. They will do the 50, collect the pay for 50 and hope it holds together before the warranty runs out.

 

[spidey07]

Because they can get away with it. Ever since construction workers became contractors as opposed to hourly employees. They can either do 30 house properly, or 50 more or less jobs. They will do the 50, collect the pay for 50 and hope it holds together before the warranty runs out.

Yep. Battle of the low bidder. Low bidder wins.

My best friend is a master trim man. He groaned about it all the time and sees the shit job on everything. Been this way for quite some time.

 

[mshan]

"Because they can get away with it. Ever since construction workers became contractors as opposed to hourly employees. They can either do 30 house properly, or 50 more or less jobs. They will do the 50, collect the pay for 50 and hope it holds together before the warranty runs out."

Any particular build year when that became prevalent?

I am particularly leery of 2005 - 2007 construction because that seems like peak bubble years, but was this practice an issue before then (e. g. 2003 or 2004 year new builds)?

 

[sdifox]

Any particular build year when that became prevalent?

I am particularly leery of 2005 - 2007 construction because that seems like peak bubble years, but was this practice an issue before then (e. g. 2003 or 2004 year new builds)?

Over here it's the 90s. I imagine earlier in the states.

 

[ctark]

I'm building a home right now. The price of our house went up before we signed the contract, prices went up due to rising construction costs (sub contractors) and materials. I dont know what kind of stuff you are asking for but my builder gave me a bunch of concessions even though he has more business than he can handle. I dont know who you're builder is but mine told me he isn't trying to make a living off one house. He has for the most part been very helpful and honest with me during the whole process. He only tries to build a couple at a time, and its more of a hobby to him more than anything. If you aren't comfortable with your builder and you can back out, then maybe thats what you should do. Take your plans around to a bunch of builders and basically set up an interview with them. Always make sure you write everything they say they are going to do in the contract, otherwise you wont have a leg to stand on latero n.

 

[ViviTheMage]

This is all third party experience...but I was following 2-3 friends who bought new construction homes, and they all ended up suing the builders, and not closing on the homes ... lots of crap that was cheaply done, or not following the contract or something....but these were ALL mass produced style homes I guess.

 

[Slew Foot]

Things are crazy here in San Jose. Homes flying of the shelf at a 20% premium from just last fall.

 

[jlee]

Who knows how accurate it'll be, but Zillow is predicting a 10% increase in home values in my area over the next year. I paid $140k (house appraised at 150k) in February. Zillow says it's worth $144k now.

 

[Oakenfold]

Verify their statement yourself. You don't need a realtor to tell you if you can access the MLS online. Find out if your local multiple listing service is available to the public.