New home sales report

New home sales in the Capital Region are down nearly a third from their sales pace last year. Builders are responding by offering many incentives to home buyers and asking local Realtors for help in marketing. If that doesn’t work, a last resort will be to reduce their selling price.
Price reductions are not pretty. New home buyers who just paid $500,000 for the “Heritage” model take a dim view when the builder sells the same model for $450,000. Then the next buyer gets the same model for $440,000 and you can easily see the direction of neighborhood values.
A recent member survey by the National Association of Home Builders, NAHB found one in five reporting more cancellations of new home orders than six months earlier, with 4 percent saying that the increase in cancellations was significant. “When you start to see cancellations, you really get worried,” said the association’s chief economist, David Seiders. Of those who said they experienced an increase in cancellations, 45 percent said it was due to a buyer’s inability to sell his existing home and a third cited buyers not being able to qualify for financing at a time of rising mortgage rates.

But the concern of Seiders and others is that cancellations are being driven by real estate investors who were ordering homes with the intention of selling them quickly in a hot real estate market. “If you’ve overbuilt the market and sales get cancelled, you have to do something with the homes,” Seiders said. “The incentives we’re seeing builders offering are clearly designed to support prices and stop cancellations.”