For the last several years, home sellers had to compete with huge inventories of distressed properties (foreclosures and short sales). The great news is that the supply of these properties is falling like a rock in the vast majority of housing markets (only 11% of homes sold in January). Many homeowners are now thinking of selling as the impact of this substantially discounted competition has disappeared. However, every seller of an existing residential property must realize that there is a new form of competition in the market: newly constructed homes. According to the National Association of Realtors’ Profile of Home Buyers & Sellers new home sales accounted for 16% of all homes sold in 2014. The graph below shows the top 5 reasons that a buyer would choose new construction over an existing home.
The top three should not come by surprise. With a new home comes the ability to customize the design of the home and the ability to avoid having to renovate or deal with existing problems. The 10% of respondents who cited “Lack of Inventory of Existing Homes” could very well increase in 2015. Existing home inventory for sale currently sits at a 4.7 months supply, well below the six-months needed to be at a historically normal market. National Association of Home Builders (NAHB) reports that there is currently a 5.4 months supply inventory of new construction available for purchase.
In Denver the new construction is adding to competition in some areas more than others. It is changing the market in Jefferson Park, The Highlands, RiNo, as well as in spots around Platt Park, Wash Park, Bonnie Brae, and some other spots in Denver. Generally speaking, central Denver’s historic neighborhoods had proximity to Downtown on their side. The Buyers for the two different properties are often different Buyers. Many of the historic Buyers are looking for a home with a story and connection to Denver’s history. Several of my older home Buyers have had bad experiences with builder quality or settling during the first years of ownership. Often times, an older home alleviates these concerns.
But, newer home Buyers are looking to purchase a freshly built home with the most up to date amenities, wow factor, and often love that the home is less maintenance and is more a lock it up and leave it concept which works for their lifestyle. One pocket of the market that is left out in this article is the homes that were built since about 2000. Many Buyers have to purchase a home off of an empty lot and some renderings. These already built new homes offer the Buyer the opportunity to walk through the space. I find that often the already built newer home wins out against the not built new home as the Buyer can see, feel, and walk through the space themselves. If appropriately priced, these homes are in direct competition with the new builds, but not at a disadvantage. With a steady buyer demand currently in the market, if you are thinking of selling, perhaps you should do it now to avoid additional competition coming to the market in the coming months.
Get in touch with me if you’re curious to see how this new build construction is impacting your specific home!