New Construction Closeout Pricing Adjustment

[George Hatch]

This is case for starting with the macro before refining to the micro. What are the prevailing value trends like for other types of homes in that market area? Because if they're going in one direction and this little subset is doing something different because the developer is weighing their carrying costs vs the sale prices then the sales which result from that situation might not be typical for the market.

For example, construction financing terms are very different from conventional financing terms. If their loan has already come due their payments might change for running late. And those carrying costs continue to accrue every month that unit stays on the books.

On the other hand if the entire market area is in decline then that would be one way to support a market conditions adjustment for these units vs the ones which had previously sold.

 

[Andee]

To answer some of the questions from other posters. I'm dealing with an area that has 11 different builders in the various developments, of which there are currently 5 different communities, and less than 5% of the sales are resale properties, this is for the 147 sales within my GLA range. The total land area in the neighborhood boundaries is roughly a 1 mile radius to the north, south, east, west, and 1.5 mile radius to the corners. Lots of suburban sprawl taking place in this area. The majority of the financing is conventional, with only 5 sales having FHA or VA financing, 4 cash sales, and 3 state "Other". The price points are between $500,000 and $1.1M, with the average at $704.000.

Of the new home sales, only 15 sold at or above the original list price, which is roughly 10% of all sales, and all were new construction with conventional financing. They are spread out over different builders and communities

 

[ZZGAMAZZ]

To answer some of the questions from other posters. I'm dealing with an area that has 11 different builders in the various developments, of which there are currently 5 different communities, and less than 5% of the sales are resale properties, this is for the 147 sales within my GLA range. The total land area in the neighborhood boundaries is roughly a 1 mile radius to the north, south, east, west, and 1.5 mile radius to the corners. Lots of suburban sprawl taking place in this area. The majority of the financing is conventional, with only 5 sales having FHA or VA financing, 4 cash sales, and 3 state "Other". The price points are between $500,000 and $1.1M, with the average at $704.000.

Of the new home sales, only 15 sold at or above the original list price, which is roughly 10% of all sales, and all were new construction with conventional financing. They are spread out over different builders and communities

Is the traditional list/sales price ratio valid if only a very small portion of new consruction homes are marrketed on MLS?