Why new home sales rally while existing home sales lag behind
Instefjord says she recently looked at 144 homes that were similar to a particular home for sale. Of those 144 homes, 74 were already under contract and 70 were still active for sale.
The problem with pricing is that among all those homes were 33 short sales — and of those short sales only six were under contract. This means that 27 of the 70 actively for sale were short sales.
And since short sales sell for less but can take months to get approved, they drag the prices down even in a tight market.
So non-short sales are trying to push the price up, and builders are pushing their prices up because there is demand on available properties.
Making it easier
Clark Ivory, owner of Ivory Homes in Utah, says new homebuilders are working hard to make sales. "We try to make it easier to buy a home," he says.
Homebuilders typically pay closing costs, for example.
They also make it easier to get loans by offering credit repair programs.
"We're taking a client who has a reasonable credit score and helping them get an excellent credit score so they can buy a home," Ivory says. "Whereas in yesteryear, in the hottest market, those with really difficult credit were still able to buy a home. And they could even do it with less money down those free and easy loan programs are not available today."
People are buying more expensive homes, he says, but those homes are also more energy-efficient.
And having a tight inventory with existing homes — even with lower prices — drives people to purchase easier-to-get new homes.
Mosher at Hamlet Homes says he sees a change in lending, though.
"Lenders are starting to feel more comfortable," Mosher says.
"But short sales are like a noose around the (existing home) market's neck, and keep pulling it back downward," Instefjord says. "When they close, if they close, they are going to close 10 to 15 percent below market value. That is a new-sold comparable that we have to use in determining the appraised value of the next home. It's a big cycle that we are stuck in and we are still not OK with short sales. We still have a huge amount of short sales in our area, and it is not a lot different anywhere else."