We can haggle over sales numbers 'til the cows come home (if their home isn't in foreclosure), but we really need to focus on the pricing numbers. The price of a newly built home fell 10.4 percent in September year over year to $204,400.00, which is about $200 higher than the low of 2003. Builders are being forced to compete with existing home sale prices, one third of which are distressed properties (foreclosures and short sales). The median existing home sale price in September was $165,400, so that's still a pretty big premium. Unfortunately, given the high cost of materials these days and difficulty in obtaining construction loans, builders take every dollar drop pretty hard.
"The pricing issue would generally hit everyone and would result in lower margins (and some additional impairments)," notes Dan Oppenheim at Credit Suisse.
Of course the pricing numbers also have noise in them.
"Those particular price figures are not adjusted for the mix of new homes being built, so the rate of decline probably also reflects the switch to building smaller homes rather than the so-called "McMansions" that were popular during the boom years," writes Paul Ashworth at Capital Economics, who says a turnaround in the new home market may still be a couple of years away.
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