There seems to be more and more encouraging news about the economy. In most areas prices are starting to increase, interest rates are hovering around 5%, and unemployment is on the decline. New home builders are seeing a rise in base prices but continue to struggle with the competition of disturbed property values.
The National Association of Home Builders states that builder confidence decreed by 2 index points in March 2010. Builder confidence is measured by a point system. 50 points or higher means a positive outlook, while less than 50 points means a negative outlook on economic recovery. In January 2010, the builder confidence level was 15. It has not been above the 50 point threshold since April 2006.
Home builders continue to be under pressure due to the brutal competition they have with foreclosures. The rate of foreclosures is decreasing but the volume of foreclosures is still ahead of 2009 numbers.
This scenario continues to be good news for the buyer. Foreclosures in and around surrounding new home communities are bringing down appraisals on new homes. The absence of foreclosure competition, the slow growth of job creation, and the expiration of several current government programs are still major concerns to the home building industry. The builder confidence index is also lower sharing prices with some top home builders.
Many home builders are offering some great incentives to buyers. There are some very attractive deals on builder specs or inventory homes. The builder spec and inventory homes are usually ready to move into within 30-45 days. This is like the speed of light compared to a short sale home. On a new home the buyer can feel more comfortable that the home will close escrow as scheduled. Usually on a short sale home the close of escrow always goes down to the wire and usually closes late.
Another advantage for buying a new home is the buyer does not have to worry about the cost of repairs. Many of the short sale homes and bank owned homes are sold "As Is". These homes in many instances require paint, new carpet, roof repairs, etc. New home warranties from the builder take the worry out of buying, in stark contrast to the As-Is condition of short-sale or bank-owned home.
There are both pros and cons to consider when buying either a new- build home or a pre-owned home. The sales price of the pre-owned home may be so attractive the buyer can not resist taking advantage of the seller's predicament. Buyers who are more interested in choosing their own upgrades, lots, and receiving multiple years of full builder warranties will continue to go the way of the new build home.