Looking around Las Vegas, it seems new homes are sprouting up like it was 2004. As the economy has recovered, the new home builders who survived the recession are once again opening new neighborhoods and building once again in new communities stalled during the recession. Are they crazy; aren’t there still loads of distressed houses available holding prices down? Well, it depends. At the high point of new home sales, almost 39,000 new homes were sold in 2005. In 2015, less than 6,000 new homes were sold. Compare that with the number of resale houses sold – about 30,000. As mentioned in a previous blog post, bank owned properties and short sales make up a very small percentage of sales right now. There is no indication this will change, given that underwater mortgages are down to about 22 percent of all mortgages. Low resale inventory should also help new home sales. Currently, there is about a three month inventory of houses for sale in the MLS. This indicates we are in a seller’s market and prices should be going up, which would also help new home builders. A healthy residential real estate market has a six month inventory of homes for sales. Prices really aren’t increasing all that quickly, though, and we aren’t seeing the multiple offers on properties of past years.
Here is what is hurting new home builders. Their prices are much higher than the cost of resale houses. Typically, a new house should cost 10 to 15 percent more than a comparable resale house. Here in Las Vegas, that difference is an astonishing 64 percent. Nationally, that number is 28 percent. Since new home builders are not going to lower their prices to make them closer to resales, shouldn’t the resale market see rising prices? Low inventory; extremely high prices comparatively speaking for new homes. Is something going to give? That would seem to be the question.
For more information on this interesting question, check out this article. http://vegasinc.com/business/real-estate/2015/dec/18/analysis-in-las-vegas-price-of-new-home-vs-resale/
There are some opportunities to get a new home at a price that rivals resale. A family I’ve been assisting in finding a home which met their specific criteria, were able to take advantage of a new home opportunity which met their criteria for the same price as a similar resale house would have cost. If you are a buyer who would like more information on resale vs new home purchasing, contact us!