Some of the nation's largest home builders are raising prices at a furious pace, even as prices for existing homes begin to moderate. While newly built homes have always sold at a premium to existing homes, the divide is widening.
"The big picture is that new-build house prices fell by less than existing house prices during the crash and have risen by more during the recovery," noted Paul Diggle at Capital Economics. He said builders will now have to slow their price growth faster than existing home sellers.
Existing home prices were up just over 12 percent annually in July, according to the latest S&P/Case-Shiller Home Price Index, which is a three-month running average. The average price of a newly built Lennar home jumped 16 percent annually in the third quarter, while the average price of those built by KB Home surged 23 percent.
"We continue to see long-term fundamental demand in the market driven by the significant shortfall of new single-family and multi-family homes built over the last five years," wrote Lennar's CEO Stuart Miller in the earnings release.