Survey Indicates House Builders Increasing Home Prices

According to an article in the Wall Street Journal, it looks as if as builders started to increase in prices last fall as confidence in the real estate market seemed to recover slightly. The data from a survey conducted by John Burns Real Estate Consulting Inc. shows 24% of home builders increased their prices in December compared with just 19% in November.

The Burns survey is a monthly survey conducted across the 231 respondents which is approximately 10% of the home building market in the US. It also found the percentage of builders who had to lower their prices fell to 8% in December last year compared to recent highs of 12% which were reached in October 2013. Experts point out that even though this shows an improvement the figures are still not comparable to those seen earlier in 2013 when the homebuilders were increasing prices more aggressively. During the first few months of 2013 the survey found that more than half of those questioned had increased their prices. Some areas such as Arizona and California were seeing double digit percentage increases compared to the previous year.

During the first 11 months of 2013 the average price for a new home in the US exceeded $300,000 which is a figure that has been rarely achieved since 2007. During the past few months the average price of a home increased from $310,800 five months ago in August to reach an all-time high of $340,300 in November last year, according to data from the US Census Bureau. However figures from the Census Bureau are often revised.

During last summer buyers lost confidence as prices increases, and as a result sales went down. This was also affected by an increase in long-term interest rates from 3.35% in May to 4.57% in September. Now interest rates are holding steady at between 4.4% and 4.5%, and the jobs market is continually improving. These factors are starting to increase momentum in the new homes market.

Experts anticipate prices will increase between 7% and 8% in 2014 compared to price gains last year of between 11% and 12%. As prices increase fewer builders are using sales tactics to tempt buyers which in the past have included free upgrades or financial assistance in meeting the down payment. According to the Burns survey sales volumes fell by 5% in December compared to November but this is as expected, as during this period builders tend to concentrate on finalizing sales rather than trying to attract new contracts.