New-home sales lagging
WASHINGTON — A new home, the dream of many would-be buyers, makes less and less financial sense in many places.
A wave of foreclosures has driven down the cost of previously occupied homes and made them even more of a comparative bargain. By contrast, new homes have become more expensive.
The median price of a new home in the United States is now 48 percent higher than that of a home being resold, more than three times the gap in a healthy housing market.
Such a disparity can be a drag on the economy. New homes represent a small fraction of sales, but they cause economic ripples, bringing business to construction and other industries. Sluggish new-home sales deprive the economy of strength.
“A lot of people are saying, ‘If I can get a great deal on a home already on the market, why go through the headaches of getting a new home?’ ” says Mark Vitner, a senior economist with Wells Fargo. “There’s a relatively small group of people who have the credit, have the down payment and are secure in their jobs that can go out and buy new.”
The gap is widening because prices of previously occupied homes are falling fast, pulled down by waves of foreclosures and short sales. A short sale occurs when a lender lets a homeowner sell for less than is owed on the mortgage. New homes aren’t directly affected by such sales.
The median price of a new home — the price at which half the homes sell for more and half sell for less — has risen almost 6 percent in the past year to $230,600, even though last year was the worst for sales in nearly a half-century.
In the Pittsburgh region, a new home price was $268,098 in February, up from $252,566 from two years ago.
Slowed by those higher prices, new-home sales have plummeted over the past year to the lowest level since records began being kept in 1963. The government provides fresh data on new-home sales on Wednesday. In the Pittsburgh region, new home sales rose 5.7 percent in February from a year earlier. Existing home sales also rose, up 5 percent, as median prices fell about 1 percent to $94,100.
By contrast, sales of previously occupied homes nationwide have fallen almost 3 percent in the past year. Prices have dropped more than 5 percent. In February, the median price for a resale was $156,100, according to the National Association of Realtors.
That adds up to a price difference of $74,500, or 48 percent, the highest markup in at least a decade. In healthier markets, a new home typically runs about 15 percent more, according to government data.
Home prices and sales still vary sharply among metro areas. Cities with more foreclosures tend to have more resale homes that have languished on the market and are priced at a bargain. That makes new homes in those areas comparatively expensive.
In Atlanta, for instance, where foreclosures accounted for one in every 23 homes sold last year, the median price of a previously occupied single-family home was $109,900, about 12 percent lower than a year ago, according to the Georgia data firm Smart Numbers. The median price of a new home was more than twice that.
“That’s as much of a difference as we’ve ever seen,” said Steve Palm, president of Smart Numbers. “New homes can’t compete, and that means jobs.”
An average of three jobs and $90,000 in taxes are created for each home built, according to the National Association of Home Builders.
In some areas, older homes were more expensive before the housing market bust. That was especially true in urban neighborhoods with little or no room left to build on. But now, buyers get their pick even in some of the trendiest places.
Residential construction has all but come to a halt. Builders broke ground last month on the fewest homes in nearly two years. And building permits, a gauge of future construction, sank to their lowest in more than 50 years.