News & Opinions
The latest news and insights from Hanley Wood’s outspoken experts and key thought-leaders throughout the residential and commercial design and construction industry.
New Home Prices Going UP in 2013
Brad Hunter / Metrostudy / April 30, 2013
Prices of new-construction homes are forecast by Metrostudy to be up 9.0% in 2013, and in the best “A/B” submarkets, they are expected to rise by 11%-15%. We are already seeing this in isolated pockets, and expect it to soon become a widespread trend.
These forecasts are based upon same-house comparisons, by the way, not averages or medians. Home price averages and medians will be unreliable this year. Why?
- As builders start buying lots in the B-/C+ locations (later this year, we expect), instead of A/B, the average home price could conceivably fall, even though same-house comparisons in each type of location are strongly positive.
- So far this cycle, demand has been dominated by move-up buyers. Soon, the first-time homebuyers will be back and they will also pull down the averages.
Through this entire year, homebuilders will be driven by extreme cost pressures (lots, materials and labor), and consumer demand is likely to continue to strengthen this year, allowing builders to pass along the higher costs. By 2014/2015, however, the pace of escalations will slow down again.
Some builders are gnawing their fingernails over lot prices that are 30% to 50% higher than last year. If the deal only works under extreme escalator assumptions, the worry is justified. Make sure the projections are based on airtight submarket data.