By Kevin Chiu
There’s no understating that over the last few years the housing market has shifted away from sellers, and is much better for buyers. There are several different factors why housing markets change, but unfortunately the financial crisis driven by mortgages gone mad is the largest reason why new homes aren’t selling strongly.
Consumers are wary, and not purchasing anything that may be a potential risk. Older, less expensive homes enable people to have a safety net, if only psychological and given conventional wisdom are unlikely to fall as much in value.
The supply of new homes drastically outweighs the demand, meaning that there is a huge number that are left unsold. Builders trying to sell new homes are slashing prices, and offering incentives to buyers. However, it’s still not enough for many folks to take the risk. Buyers are looking for bargains, and properties they can improve to make a profit. Many of the homes that are being bought are foreclosures as buyers take advantage of other people’s pain.
The incentives that are being offered to purchase new homes range from new home builders paying closing costs, home warranties to upgrades in carpeting, kitchen counters, flooring and appliances. Any financial benefit that can be given to the buyer is seen as a way to sweeten the pot.
Extras would have been enough a few years ago. However, troubled financial times amid greater economic uncertainty for many buyers still make it too small of an incentive, slowing new home sales to a crawl.
Cutting prices is always a great way to show that new home builders are motivated to sell their inventory, and some of the largest U.S. home builders have cut prices as much as 60% from the peak of the market.
Although new homes may be fantastic, and offer some great on-site facilities, including swimming pools and other amenities in some new developments consumers are looking beyond those factors when buying property at the moment. However, if your new build stands out from the rest, and has those finishing touches “that dress to impress” you may just attract a buyer.
Not only does a home need to be in the perfect location with excellent finishes, at the right price they have to beat the competition on a variety of other fronts. However, buyers are still likely to choose older homes in established neighborhoods for resale value, and the peace of mind they get from purchasing a home for less money.
In the current climate there are some great bargains to be had if you have the cash. Even the best new homes on the market may not be appealing enough as more homeowners are staying put in the current climate. Doubts about the U.S. economy are outweighing the benefits of buying a new home.
Over time conventional wisdom dictates that the housing market will improve. Just how long that is likely to be is a million dollar question that could be worth borrowing from the bank to bet on, if only lenders’ would loan money in the first place.