February 2010
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 pricing began
declining about nine months before resale pricing.
2. The rate of resale
median sale price decline accelerated as the proportion of REO sales increased.
3. 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 Ultimate New Homes
Database. This is not an all inclusive list of specs, but is fairly
representative of the 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
reached that limit before resale home pricing.
3. I believe that new
home specs have hit that lower limit.
3. Resale home prices
may still fall because of the impact of the REO submarket, but I don’t expect
it.
4. The best economic
time to buy is when home prices are nearing the lower limit.
5. Spec pricing looks
as if it has bottomed out.
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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