Over the last few years, we’ve consistently had tidbits of positive news here and there: interest rates creeping down, a slight uptick in sales, a bump in consumer confidence…
As we know, since around 2007 the majority of real estate news has been negative. That being said, there is a bit of optimism in the air – not just in Charlottesville, but throughout the country. Builder confidence is up again. Consumer confidence, although down slightly last month, has been on the rise. At Nest Realty, we’ve definitely seen a lot of home buyer activity in Charlottesville and Albemarle County during the first few weeks of the year. So, overall, the market seems to be moving in a positive direction.
One of the drivers for sales in the Charlottesville area real estate market during 2011 was new home sales. Approximately 20% of home sales in Albemarle County during 2011 were new home sales – pretty amazing. Low land prices and low material prices were major driving forces in generating so many new home sales. In reality, there were a lot of buyers that got great deals on new homes over the last year or so.
But here’s an interesting twist: we’ve heard grumblings of building material cost increases over the last few days. Drywall, shingles, lumber, etc, etc all are increasing in price. According to Charlottesville new home expert Greg Slater (who represents Piedmont Realty and Construction – one of the region’s largest homebuilders), drywall prices are jumping around 30%, shingles are up 15%, and other materials will surely soon follow. Check out Greg’s post and analysis here.
So, what does this mean?
1. New home prices are probably inching up over the next few weeks. If you are tracking new homes in the Charlottesville MLS, you can expect to see some price increases for homes that are either a) not completed yet or b) To-Be-Built. I would expect that most of the major builders in our area will be raising their prices after they discuss these materials price increases with their suppliers.
2. This could actually help stabilize re-sale prices a bit. New home pricing is a major factor in determining re-sale prices – many home buyers consider new and re-sale homes when looking to purchase and if they can buy a new home for considerably less than a comparable re-sale, then they will typically choose the ‘new’ option.
So, we’ll track this closely over the coming months to see how this national trend affects us locally. Stay tuned…this could be another interesting year.