Builders Gone Wild

It might just be me, but it seems lately, at least among new homes, we've returned to the Halcyon days of a year or two ago. Houston already has more housing starts that any other city in the nation (55,105 for 2006 according to Bank of America Real Estate Survey October 2007) and yet, of late, builders have been proving to be the biggest competition in the resale market. In some areas in our metro resale homes sit on the market while builders down the street sell their product at or below cost.

Most of the time a builder will not negotiate price. Instead they offer incentives; free upgrades of material or decorator options, free appliances, assistance with closing costs etc. But as builders feel the credit crunch they're dropping prices in addition to offering the incentives. This is because it's often more expensive overall for a builder to maintain an unsold home than to slash the price and get it off the books.

The more saavy builders saw the writing on the wall and prepared for this by setting prices on new developments at or below previous year's prices. This is espcially true inside the Loop. My listing in attractive areas of town are sitting there longer while buyers drive past these quality homes to buy something brand new for only slightly more. They're still buying in the best neighborhood and they're getting something 5 or 7 years younger.

It really is the smart way to go. Even a $30,000 increase in sale price only represents a small increase in a mortgage payment when spread out over 30 years (less than $200/mo). That extra payment can turn into more equity at the end of the day; the home is newer, right now the builders are selling at lower prices with more upgrades and buyers don't have to wait if buying homes already in the builder's inventory (now those are the ones the builders want to get rid of!).

Of course, some builders offer more than others and some are better quality so it's wise to consult your REALTOR® for the scoop on the various builders in your area.