New Home Prices Drop

Big price drops are happening with newly built houses in real estate markets like Austin, Nashville, Phoenix, and Tampa.

With today’s new higher mortgage rates and a slowing homebuyer demand, home builders are looking to liquidate inventory before the housing crash gets worse.

New Home Prices Drop

New home builders are dropping prices because of a combination of 1) Record Home Construction to go along with 2) Crashing Buyer Demand means that the 2022 Housing Market doesn’t have long before the Bubble pops. Wall Street is predicting this as well. The Stock Prices of publicly traded Home Builders such as Lennar, DR Horton, and Pulte Group are down by -40% YTD (compared to market average of -23%). This is a sign that Wall Street Investors are also predicting a Housing Crash.

One trend that is likely to occur is a decline in Housing Starts. Since Home Builders see declining demand, and have nearly 2 Million Homes Under Construction to work through, they will pull fewer permits and start construction on fewer homes. 

Another housing problem is Cancelled Contracts. According to John Burns Real Estate Consulting, there has been big increase in homebuyers cancelling contracts for homes under construction. Expect this trend to continue as long as Mortgage Rates stay high.

Although this video is talking about new home construction,  resale residential homes in many markets have been seeing substantial price drops for a number of weeks now.  Personally, this is just the start of a trend that I think will go on for quite some time’

It seems that there are many people out there who for some reason just can’t believe that real estate prices can go down.

The last big housing bubble bust was back around 2007.  So, perhaps there were quite a few young folks then, let’s say around 15 years old, who really didn’t pay attention (I mean what teenager would)  to what was happening in the US housing market.  Actually, back then, in some parts of San Diego, housing depreciation approach 30%!

But, now that young person who was just 15 years old in 2007, is now 30 years old and right in the range for buying their first home.  Perhaps, these young folks have really bought into the  industry line that this is just a mild dip, or the way overused phrase, a great opportunity to buy, because they never really went through our last real estate bust.

My opinions here are just that, opinions!  The fact that I’ve been in the residential real estate market for over three decades, does not mean that my opinions are going to be any more accurate then your mother-in-law’s opinion, though I sure hope they are!

For those of you who may not be regular readers here is the link to the first warning blog post that I put out; my first post where I called the real estate market top was June 15, 2021 (https://brokerforyou.com/brokerforyou/real-estate-market-downturn/ ) . On June 17 I had a follow-up post ( https://brokerforyou.com/brokerforyou/real-estate-market-bust/ ) where I added additional indicators, that to me showed that the market was in a topping phase right now! I put the links to each one of those prior post above, and would suggest if you’re interested, to reread those posts!

Buckle up your seatbelt because the downward ride for real estate values has just started!

New Home Prices Drop

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