The premium buyers are paying for newly constructed houses is "abnormally high," according to a California marketing firm which tracks the market.
Typically, purchasers of brand-new houses pay a 1% per annum premium over and above similar houses on similar lots that have already been lived in, according to the John Burns Real Estate Consulting firm. But now, the spread is more like 2%, and sometimes even higher, the firm reports.
Thus, whereas it used to be that if a 10-year-old existing house was selling for $400,000, a new one of similar design, square footage and lot size would go for $440,000. But now, that same new home is selling for $480,000 or more.
"The new home premium is typically 1% to 1.5% for every year of age difference over comparable but older resales, which is generally attributable to newer floor plans, exterior elevations and home features," the Irvine, Calif.-based consulting firm says. "However, with the recent push in home prices, we are seeing this premium increasing to 2% to 2.5% for every year of age difference over comparable area resale homes."
The company says builders are benefiting from what it calls "the spoiler effect" resulting from the limited supply of new houses and heavy investor activity in the resale market. And as a result, they are able to jump their prices at a faster clip than sellers of existing houses.
Lew Sichelman is an independent journalist who has been covering the housing and mortgage markets for more than 40 years.
