A survey in October revealed that 36% of all home builders had cut their prices by 5% or more (up from 3% 13 months earlier). What the survey didn’t discuss were builders that don’t report dramatic price cuts because they are instead increasing incentives such as upgraded-this or expanded-that, or even throwing in all previous options.
New construction has dropped over 27% since October, 2005. However, it takes many projects years to go from land acquisition through open houses, so the inventory waiting around for owners like a bunch of shelter pups is staggering.
Recently, the Commerce Department reported that the median price of a new home fell by the largest amount in 35 years. The median home price in September was $217,100, representing a 9.7% decline from September 2005. It was the steepest year-over-year decline since December 1970.
The Palm Beach (Florida) Post described the tales of woe that are becoming more and more commonplace as builders attempt to unload inventory and wait out the decline.
In a handful of deals during the last several months, Miami-based builder Lennar Homes slashed prices on the street by as much as 51 percent, unloading the last of its houses in the Martin's Crossing development to select investors.
That means residents such as Mark and Kim Andersen, who locked in $506,400 when they signed a contract for their five-bedroom home in early 2005, are living just down the street from a nearly identical five-bedroom home that Lennar sold to another buyer for $250,000 in late October.
That buyer, Howard Fishman, flipped the home three days later, reselling it for $425,000, records show.
At the Links at Emerald Dunes, a Lennar development off Okeechobee Road in West Palm Beach, the builder is offering new three-bedroom condominiums for $239,900 - more than $85,000 off the original asking price.
South Florida is a hot spot, but other regions also are seeing the same. Price reductions of up to 35 percent have hit the books in Lennar and KB Homes developments in Tampa and Washington, D.C.
Mark Andersen admits [he finds it] difficult to believe that Lennar would sell an upscale, five-bedroom home at a $256,000 discount - even in this slowed-down market.
"Unless they needed to make their quota or whatever, I can't see how they would do that, or why they would do it," said the 40-year-old trucking company owner.
When he and his wife, Kim, signed the contract for their home almost two years ago, "the market was going really strong."
In the boom times of the 1980’s, my spouse and I bought a new home. The builder dragged its feet, leaving us without permanent housing for a year. We asked for simple options that we’d have gladly paid for during construction, and were arrogantly rebuffed each time. Now, all I can hope for in the back of my mind is that the builder we dealt with is suffering more than all the rest combined.