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November 23, 2014

Builders Hike Their Prices

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Builders Hike Their Prices

More builders are reporting they’re raising their prices on new homes. Twenty-four percent of 231 builders recently surveyed say they raised their prices in December, which is an increase over a 19 percent low reported in November, according to John Burns Real Estate Consulting Inc. data. The percentage of builders who say they lowered their prices fell to 8 percent in December, after a 12 percent high in October. 

“The pricing environment notably improved,” Jody Kahn, a senior vice president at Burns, told The Wall Street Journal. “It’s still not back to where we were earlier in [2013] with builders raising prices aggressively.”

In early 2013, more than half of the builders surveyed had reported raising their prices, with some markets, such as California and Arizona, even posting double-digit increases from 2012 levels. But prices curtailed during a slowdown in the summer months as interest rates rose. 

Lately, however, interest rates have mostly remained flat — around 4.4 percent to 4.5 percent averages — and improving employment numbers have builders feeling more confident again. 

Average new-home prices reached an all-time high of $340,300 in November, according to the U.S. Census Bureau.

Michael Gapen, senior U.S. economist at Barclays, predicts that home prices will rise 7 to 8 percent this year adding to last year’s gains of 11 to 12 percent. 

Buyers “know that builders tend to make price increases at the first of the year,” says Gene Swang, a division president for David Weekley Homes. “I think customers are concerned that if they didn’t get a home under contract [in December], they’d see higher prices in another month.”

Source: “Santa’s Gift to Builders: Higher Home Prices,” The Wall Street Journal (Jan. 21, 2014)

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