Monday, October 29, 2012

New home prices in the USA

New Home prices have turned the corner and forces are driving rising prices in the foreseeable future. In this article, we discuss these forces and reveal the trends that are not evident to those who rely only on publicly-available data to form their views on home prices.
The popular aggregate price indices have shown a modest turnaround in home prices, rising nominally in recent months, but these median readings obscure the dramatic cross-currents that are at work underneath the surface. Effectively, there are two housing markets, each exhibiting distinct price trends. One consists of residential developments that are within a reasonable commute of job centers, with developed shopping and entertainment options and good schools. These are the projects that the builders care about, characterized by strong new-home demand and an increasingly scarce supply of homes and lots. The other “market” is the massive collection of remote lots, struggling subdivisions, and mothballed master-planned communities that were developed during the last year of the boom (2005/2006). Projects with these characteristics are almost completely dormant, and have very little impact on the builders.

Factors that will keep home prices rising in the “A” and “B” (good) locations are:
• New-home inventories are so low that builders who have standing or nearly-finished homes can command higher prices.
• Lot scarcities, expected to worsen in 2013, will force builders to raise prices, and the limited supply of new homes for sale means that builders have more pricing power.
• Rising costs (materials, lot prices, permitting/impact fees, and labor) will force builders to raise prices in order to be profitable.
• Pent-up demand re-emerging (people who were doubling up are now finding jobs and forming their own households, and people who were waiting for prices to bottom are now taking advantage of the buying opportunity and record-low mortgage rates). Household formation rates are forecast to increase by 50% over the next three years.
Meanwhile, in the “D,” and “F” locations, plentiful supplies of bank-owned homes for the moment continue to make new home construction a money-losing proposition. If buyers are willing to commute to those areas (‘drive ‘til you qualify’), they can buy homes from banks, at auction, short-sales, or from investors who bought from the banks or the agencies, and they can often do so at a price that is below replacement cost.

The “C” locations are neither good nor bad at present. While not all “C’s” are created equal, within two years many will rise to “B” status. No builder wants to be “below C level.” (very punny). I like Mike Castleman’s (Metrostudy’s CEO) statement during a presentation to a national builder client that builders will soon be “gnawing at the bone of C lot supplies.”

To invest in the USA please click here


  1. You given a very good information about the home loans. Thanks a lot for the nice post.

    small business loan required

  2. Getting the information about miami real estate, FL homes for sale used to be a time consuming affair, but with online search tools, it's never been easier. Just a few clicks can get you the knowledge you need on several miami real estate properties in your area of interest. Just knowing you've found the right number of bedrooms or the right price isn't enough to make a large investment in a home however, which is why offers much more.

  3. Really ths a very good platform with the details information on the Looking for real estate investors for your business. The real estate investors in UK has been still active i think. So i read out the blog posts whatever you have posted hera and all are really great. Please update more posts hoe to choose an effective real estate agents. Thanks you..