As most readers know by now, new home sales are now at their lowest level in nearly 50 years. We know what to attribute this to: the huge number of existing homes for sale, falling household income, chronic unemployment, no more high-leverage loans, shifting demographics, and the new normal of watching our pennies. But, there is something else I hadn’t thought about until yesterday.
I was listening to a local Saturday afternoon radio show on real estate, and they had on a former (aren’t they all now?) builder. He was talking about a new upper market home he took a tour of, with the ten foot ceilings and 8 foot doors. From the outside, at a distance, it looked great, like it just might be worth paying the premium over a similar (on-paper) used home. But on closer inspection, he quickly noticed the cheap materials and craftsmanship.
The eight-foot doors were hollow, the woodwork was paint grade prefab, the carpets were indoor-outdoor, the moulding was cheap, the windows thin and tract-style, the kitchen had low-end counter tops and appliances, and so on. And, as a builder, he could tell that the craftsmanship was shoddy.
Although the price of land is lower for homebuilders now, materials have skyrocketed in this commodity price boom, and cities are imposing fees upon fees to make bring in much needed cash. With the competition of millions of used homes, both non-distressed and distressed, builders have to cut corners where they can.
So not only are the new homes more expensive than a same sized used home in a similar area, they are not built as well. It’s better to buy a used home and spend the difference on doing a little custom remodeling.
I know it’s not a big factor in the overall scheme of things. But it’s just one more thing. I don’t think new home sales will see much of a pickup until we’re closer to the end of this decade than to where we are now.
Have you seen this in your town?