May 2009
Spec Home vs. Resale Prices
This article offers an overview of the spec home list pricing trend and the resale sales price
trend over the last three years. Contrasting these two trends provides valuable
insight into pricing issues.
From mid 2005 through mid 2007 the median resale sales price was
basically flat, while the new spec home list price has been steadily declining
since mid 2006. This presentation
offers these valuable insights:
1. Spec list pricing has been
falling for the last two and one-half years.
2. Spec list pricing is down 35%
in the last 30 months.
3. Resale sales price has fallen
for the last twenty-four months.
4. Spec pricing began declining
about nine months before resale pricing.
5. The rate of resale median sale
price decline has accelerated as the proportion or REO sales in that market has
increased.
6. Spec pricing looks as if it
has bottomed out.
Resale Home Sales
Price vs. Historical Norms
Below is the updated version of the Median Resale Price Projection which
we created and first published in February 2007. As you can see, there has already been a major over-correction
in the median sales price.
The source of the data for our spec pricing study is the specs that are
listed in the Ultimate New Homes Database. This is not an all inclusive
list of specs, but is fairly representative of whole. Some, but not all, of the spec pricing data includes some of
the incentives being offered by the builders. The source of the resale pricing data is ARMLS.
Commentary
The previous statements are facts.
The statements I am listing below are suppositions that I have made from
these facts:
1. There is a limit as to how far
prices will fall.
2. Spec home pricing will reach
that limit before resale home pricing.
3. I believe that new home specs
are at that level.
4. The median resale home price
is very near the bottom, but may still be impacted by foreclosures as a large
number of ARM’s reset.
5. The best economic time to buy
is when home prices are nearing the lower limit.
6. Spec homes are at that lower
limit, and resale is quickly approaching it.
7. Because of over correction,
pricing will likely rebound quickly once bottom is reached.
From my
perspective, the bottom line is, “Now is a once in a lifetime opportunity to
get a deal on real estate, both specs and resale”. For individuals open to considering a new spec home as a
residence, don’t wait too long.
How many times have you heard, “If only I had acted?” Don’t let this be one of those times
for your clients.
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2009 - This information is
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