Buy new or used? That is the question!

February 23, 2009

After reviewing both our recent New Home Trends report and the Local Market Action RMLS report, I realized that there really is two different views of the inventory.  We got some bad news that our Portland Metro area total home inventory increased to 19.2 months in January.  However, new home inventory is down by over 25% from where it was a year ago. 

 

In review of the RMLS Market Action report, new listings were up 123% from December!  How do we interpret this?  Are home Sellers more confident to enter into this years market more so than last years?  If so, are they really coming on the market at this current markets value?  It also noted that pending sales were up 52% from December.  This could be a sign of more realistic Sellers or the begining of our seasonal climb in sales.  Though I feel both are possibilities, the increase in inventory relates more to unrealistic Sellers.  The brokers that I talk to still complain that the sellers they are working with, will not lower their prices to this markets value.  They are still hung up on what their neighbor got for his house in ‘05/’06.  Of course, I always ask, “Then why are you listing the property?  Why would you continue to throw good marketing dollars away on a property that you know is over priced?”

 

I actually, did not think that over a year into this that we would still have Seller’s not getting it.  Although, hopefully, after this boom of refinances rolls through in a few months and the neighbors start talking about what the appraisals came in on their homes, this might change some realities.  Let’s hope.

 

Here in lies the point of all this.  While resale inventories are going up, new home inventories are going down.  Why?  Well for starters, by force or by choice, builders are not increasing their new inventories.  Their focus is on reducing them.  Builders are reducing their prices to sell.  For instance, here at Marnella Homes, our town homes for sale at Volare in Happy Valley, are selling for what condos and town homes sold for in late 2003 and 2004.  We had to reduce prices in order to start selling again.  Also, Builders usually have the ability to be more creative and offer incentives that a home owner can’t or isn’t willing to do.  We buy the mortgage rates down, as has been seen recently with the 3.875% 30 year fixed mortgage promotions.  Another example is we allow people to move into our homes early so they are able to deposit in escrow the funds that they would ordinarily be paying in rent.  In essence, living rent free in our homes up to the closing date and having the ability to apply 100% of the monthly deposit towards the funds necessary to close.  Not too many home owners would allow a buyer to do that.

 

Besides the obvious reasons to buy a new home; new construction, energy efficiency, updated style and interior finishes, etc., it is the motivation of the builders that are moving this inventory.  These builders are far more motivated and creative than most home owners.  Most importantly, they get it!  They understand what has happened in this market and what is needed to move their inventories.

 

So, before you go out and make a final decision on the purchase of a resale home, check out the builder’s inventories in your area and see what values they are offering.  I am confident you will find the reasons that the new home inventories are moving.

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3 Responses to “Buy new or used? That is the question!”

  1. Mike Says:

    Just passing by.Btw, your website have great content!

    _________________________________
    Making Money $150 An Hour


  2. I prefer buying new and recommend it to my clients, but there are obviously pros and cons to both.


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