Zonda data, which tracks 18,000 actively selling new home communities across the country, shows that 56 percent of projects raised new home prices in July, compared with 39 percent during July 2019.
“Builders are raising prices for two reasons,” said Ali Wolf, the Chief Economist with Meyers Research. “For starters, costs are going up. Lumber prices are up over 100% since mid-April and that’s putting pressure on margins. On top of that, builders are raising prices to temper demand. Land is a valuable and limited commodity. Builders need to be careful to not sell through all of their lots too quickly so many will slow sales intentionally. Today’s low mortgage rates allow builders to raise prices without crushing demand.”
Here are some of the surprising stats about new home prices that came out of Zonda’s latest report:
• Roughly 70% of all new home communities in Phoenix, Denver, Las Vegas, Sacramento, and Riverside raised new home prices in July compared with 40-50% this time last year.
• Builders in Phoenix and Las Vegas have a unique driving force: California in-migration.
• When the pandemic hit, the assumption was that the Las Vegas housing market would get hammered. In fact, the local economy has one of the highest unemployment rates in the country. The employment stats and the housing market, however, tell two totally different stories. Las Vegas has been a top migration market for years, causing pent-up demand for for-sale housing, and today’s low mortgage rates and the desire for more space has pushed a lot of residents into homeownership.
• Sacramento and Riverside are benefitting from a completely different reason: commuters. Those living in San Jose and San Francisco are now keener to live further out for affordability because of the shift to work-from-home. Riverside is capturing residents in Los Angeles and Orange County that are looking for more space.
• Denver is one of the hottest markets in the country, partially fueled by out-of-towners as well. Tech workers fleeing higher cost metros are contributing to Denver’s strong housing market.