Friday, February 25, 2011

National New Home Sales Drop A Shocking 11.2% in January 2011

Sales are now down 80% since the peak in July, 2005.  BTW, new home sales information comes from the US Census Bureau,  not from the data-drifting National Association of Realtors.
Image copyright CNN.

6 comments:

craigger said...

Good news for the eventual rebound in housing prices. The only thing that would be better is to blow up existing houses. Has anyone seen good info for household formation projections nationally and in Cville.

Also, has anyone seen a similar chart for Cville on new home construction. Anecdotally, it doesn't seem like its down nearly that much with all of the new town home, old trail, and belvedere constructions.

I continue to be shocked at the price of new construction in Cville. I keep getting quotes of 160-200 a sqft excluding land, which is at least 30% higher than other parts of the mid atlantic (and even within a 75 mile radius!). The martha jefferson construction, UVA construction and new home starts have kept the subcontractors busy enough to not have to drop their prices. I'm just venting.

Anonymous said...

The suggested price/sq.ft. of spec homes in Cville/Albemarle, when builders list them in the MLS, has definitely gone done significantly since I started paying attention in early 2008. If you look at the chart here--which I know is not specific to our area--I think there was a really golden moment to get in on custom construction around summer 2009, when the entire machine was grinding to a halt, and there were oversupplies from the anticipated bubbly market of everything from labor to all the materials--no one was paying for new house starts in summer 2009, and no local builders could afford to start them on spec, and all the dealers of materials were desperate to unload stuff that they were just going to have to pay to store indefinitely. Once the industry is "scaled down"--meaning a large percentage of folks are out of work/no longer seeking work in construction, the factories have stopped turning out the windows/siding/flooring etc. at the bubble pace, etc.--the prices bounce right back, obviously because of supply and demand. The supply got cut so drastically--there was really a bloodbath locally in construction in 2009--that it's now closer to demand. One can't expect that an industry out of sync with the demand will just sit around charging ever-lower prices as the market tanks--as someone close to the building industry I know that does not every happen. If you're looking to build to your advantage in this kind of climate you have to be ready to get out of the gate seasonally and right on top of what's going on.

C'ville Bubble Blog said...

Craigger, weren't you going house hunting starting in January? How's that going?

9:45am, there are now "new construction" homes that rival, or are lower than, the "slightly used" homes being sold out in the county--anecdotally. Also, there are new construction homes that are less than "distressed" home sales from this decade.

craigger said...

My wife and I have spent a lot of time looking. We have decided to live in one of two places - "walkable" downtown Cville (I work off the mall), or in the Western HS district as far west as Owenwsville RD. We priced out a couple of renovations downtown, new construction in the county, and walked through a lot of existing supply in the county.

Current prices in town make it too expensive to do a "rational" renovation (which I would define at the most expensive end as a 4 cap purchase on your house). I don't think some of the ask prices are crazy expensive (probably 15% overvalued), but I do think the renovation costs are insanely high. And this is why north downtown looks dumpy relative to many other college towns housing stock. People may disagree, but i don't think downtown prices are crazy high because rent here is very expensive relative to income. There is very little supply downtown. walkable B+ 3Br / 2Ba rentals are in the 2000-2700 range. That would support a 400k+ price pretty easily with today's mortgage rates. I don't think reno costs are going to come down (actually, they are probably going to grow at high single digit rates with current and coming inflation), so that only leaves possible home price drops to make any reno work. And there are no foreclosures in well located ares to make that happen, so I think downtown is out for us.

For the county, there is very little land available for the parameters we have set up. We have made several bids on land that were 20-30% below peak 2007 prices, but all of the sellers said no (mind you resi land nationally has probably dropped 50%+). The land parcels we bid on had no debt on them, so there is no reason sellers have to sell other than opportunity costs. To the extent we do find land, we have already contacted 6 different home-builders and they have given us all in new construction costs (excluding land) in the 160-200 sq ft range (depending on lot grading etc). Mind you, that's not for a marble palace, but for what I would consider a B+ / A- construction of 9ft ceilings on the first floor, 8ft on the rest, low end hardwood floors, lowes fixtures, and GE appliances. If we can find a nice lot for less than 250k all in, there may be a chance we could do new construction.

Existing supply is a disaster, and I would agree with your point about new construction being cheaper than old. Current prices for existing are insane from a quality adjusted perspective (old lay out, mechanical depreciation, etc), but if you factor in how expensive replacement value is, I would also say that some of the "distressed" properties are not crazy expensive (probably again 10-15% overvalued). We are going to wait until July before we decide to move out of our 2Bd / 2Ba and rent a house, as most of the supply comes on line in May and June. We haven't made any offers on existing supply, as we haven't seen anything we really like yet within our price range (800k ceiling).

What new construction opportunities have you seen?

AliG said...

Craigger,

we seem to have similar circumstances and looking in similar areas at similar price points (!). If you have not yet looked in to Hyland Ridge (behind Fontana and adjacent to Ashcroft) I suggest you inquire in to it. It is a new development by Southern Development (not yet gone to sales). It is close enough to downtown to make it attractive to me. If you wish to chat more perhaps BB can forward my e-mail address.

BB - thanks for your response to my previous post - as always, I am a big fan of this site.

Anonymous said...

We were also interested in the Hyland Ridge Development, but noticed they have not done much with the the land over the last year. We were originally told the home sites would be going on sale in Jan of 2011, then that date was pushed back to spring 2011, then fall 2011. Now it is winter and still nothing is being built. Anyone know what the hold up is, or if they are still planning to develop this area? Thanks.