I took a Generation-X friend of mine to tour a model home recently because she is interested in moving to Florida. I was surprised by how many people our age were out shopping for a new home.
According to an article by Bloomberg, homebuilder confidence in the United States has risen the most since September of 2002.
As soon as builders sense a turnaround in the real estate market, they seem to raise prices. In fact, the base price had jumped since I had previewed the model for her just a few months ago, even though I'd still call the homes affordable compared to what was available during the housing peak.
Several of the inventory homes had been sold. And, the builder was no longer offering a $10,000 off incentive.
The National Association of Home Builders/Wells Fargo confidence index made its biggest gain in almost a decade, recently climbing six points. Real estate and home design trends, such as Gen-X favoring newer, more artistic and airy homes, may be giving new homebuilders a reason to be confident.
New home buyer traffic is picking up
According to the article, builders are more confident as buyer traffic has improved. I know the sales representative was busy showing the model home to prospective buyers when I stopped by with my friend, who is in her mid-30s. It reminded me of house shopping during the start of the housing bubble. When we found a model home we liked in 2004, we put money down for a lot without even looking at the physical plot of land. We were afraid of being put on yet another waiting list to get into new subdivisions. I can see how there is some pent-up demand for new housing since the recession. Still, it pales in comparison to the crazy high demand during the housing bubble.
Resale deals are drying up
Here in Florida, most of the great short sales and foreclosure deals seem to have dried up. Any foreclosure that hasn't already been purchased has probably been sitting empty for years. Most banks are no longer allowing people to buy homes they can't afford so there aren't many "newer" foreclosures. My friend's last home purchase was a foreclosure, but she has sworn off of such "deals," since she had to spend so much money to fix it up.
People still think new is better
I'm probably not the first person who wanted to purchase a new construction home because new just seemed better. I liked being the first person to paint my house. I liked starting with a clean, fresh palette. I also didn't mind taking out a 30-year mortgage because I knew that after 30 years, my house wouldn't be that old compared to one that was already 20 or 30 years old when I bought it. Plus, I don't like the negative "energy" of living in a home where someone else has lived or possibly died.
Interest rates can't go lower
I'm not in the mortgage business, but I can't fathom how interest rates could go any lower. Low interest rates are making homes more affordable. It seems foolish for people who are renting to keep renting instead of locking into a low interest rate now. In some cases, people rent because they want more flexibility in case they have to move. But there are plenty of Generation X'ers who are settled enough to buy.
I think new home builders will thrive in the next decade even though there may be a greater inventory of resale homes as baby boomers move into nursing homes or pass away.
My Gen-X friend told me she would never purchase a resale home that was owned by an older person only because she has a completely different taste. She wants a newer home that is built to be more energy efficient and "green." And, she says, she doesn't want that stale smell and negative energy that may still linger in an older home.
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