The residential real estate market is
challenging, but buyers can often get a lower price and better terms if they
are a skillful negotiators.
Newly constructed homes command
higher prices than existing homes. Newer appliances, newer building materials
and such, plus the new homes being generally larger-sized, account for most of
the difference. Historically the premium of new home price above existing home
price has been about 15 percent. However, recent price data say that the
premium has risen to 45 percent. That is, the median price of new homes in
January was $230,600 versus the median price of existing homes of $157,900. The
much lower existing home price is partly due to distressed home properties on
the market that are selling for much less than the replacement cost. Still, the
exceptionally large price differential between new and existing homes may imply
that either new home prices have to fall or that there is good growth potential
for existing home prices.
The ratio of the new home price over
the existing home price is shown in the graph above.
-Lawrence Yun, Chief Economist &
Senior Vice President, Research
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