Record lows for new home prices
Earlier this year, the number of new home sales sank to a record low, with overall home prices dropping to their weakest levels in the past decade.
According to a report by the U.S. Department of Commerce, the sales of new single-family homes have decreased by nearly 17 percent. There are two main factors behind the drop: the recent oversupply of new homes for sale and the continuing increase in the number of older homes falling into foreclosure. As a result, economists predict that the housing market may be even slower to recover than was previously predicted.
February marked the biggest decline in housing starts in almost 30 years, according to market reports. Only 186,000 new homes were available for sale last month, which is the smallest number of new homes on the market since the late 1960s.
In addition, the National Association of Realtors reports that last month, the price of new homes was about 45 percent higher than the price of older homes. Traditionally, the price of new homes has only been about 15 percent higher than formerly occupied homes, proving that homeowners and banks are selling pre-owned properties for much less than new construction.
Homebuilders are facing fierce competition as more homes fall into foreclosure in Georgia and throughout the country. Because foreclosures are generally available for purchase at well below market value, builders have been forced to halt all new construction plans and projects.
While analysts are predicting that overall home sales will increase later in 2011, they also believe that the large price gap between new and pre-owned homes will remain until there are fewer foreclosures for sale. The current home pricing declines may ultimately stall the recovery of the housing market.
Source: Reuters, “New home sales plumb record lows, prices stumble“, Lucia Mutikani, 23 March 2011