Why Is It Not Advisable To Buy New Homes In Weak Markets?

By Author: Arond Devit
Total Articles: 14
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Our recent financial dilemmas have made us run after several debt-relief options and debt management plans for days and the same has made us realize the importance of financial alertness and the value of certain timely financial decisions. Here I would like to assess the profitability of buying a new home in the wake of a weak market and the desirability of its financial results. As a matter of fact, the median price of a new home in the United States is now 48 percent higher than that of a home being resold, more than three times the gap in a healthy housing market. Such a disparity can be a drag on the economy. New homes represent a small fraction of sales, but they cause economic ripples, bringing business to construction and other industries. And thus the sluggish new-home sales deprive the economy of strength. As a result a lot of people are saying that, 'if I can get a great deal on a home already on the market, why go through the headaches of getting a new home?’. According to Mark Vitner, a senior economist with Wells Fargo “There's a relatively small group of people who ...
... have the credit, have the down payment and are secure in their jobs that can go out and buy new.” Furthermore, the gap is widening because prices of previously occupied homes are falling fast, pulled down by waves of foreclosures and short sales. However, the new homes are not directly affected by the short sales, but the median price of a new home has risen almost 6% in the past year, which is making people prefer resold homes to new homes.

Slowed by those higher prices, new-home sales have plummeted over the past year to the lowest level since records began being kept in 1963. By contrast, sales of previously occupied homes have fallen almost 3 percent in the past year and the prices too have dropped more than 5 percent. Home prices and sales still vary sharply among metro areas. Cities with more foreclosures tend to have more resale homes that have languished on the market and are priced at a bargain. That makes new homes in those areas comparatively expensive. In Atlanta, for instance, where foreclosures accounted for one in every 23 homes sold last year, the median price of a previously occupied single-family home was $109,900, about 12 percent lower than a year ago, according to the Georgia data firm Smart Numbers. The median price of a new home was more than twice of that. In some areas, older homes were more expensive before the housing market bust. That was especially true in urban neighborhoods with little or no room left to build on. But now, buyers get their pick even in some of the trendiest places; although people are still interested in having a custom-built home but they can't finance the purchase and tighter credit has made it harder to get larger loans. A new home generally makes people feel richer but the priority in present is to save for the tough times and to support the financially unpredictable future which is volatile and vulnerable. Thus people are turning up to resold house more than buying a new home for the time being.

Aronddevit is an author of finance and also written several financial journals related to a wide variety of topics from banking to debt relief. She has also published books on money management in general and recently on free debt consolidation help and the best debt settlement program.