New-home prices are decreasing

New-home sales in the Washington metropolitan area were down 30 percent in the first quarter of 2006. By contrast, sales of existing homes were down 11 percent in the first quarter.

Because new homes typically cost more than existing homes of similar size, builders need to work a little harder this year to sell their products. Because area home values are so high and mortgage interest rates have risen, would-be home buyers are very cost-conscious.

“The main concern among consumers today is: ‘I don’t want to pay too much,’” says Victor Furnells, regional sales director at Hanley Wood Market Intelligence.

“As a result, some builders are going to no-haggle pricing, with all the options included in the price. Others are offering new incentives or more creative ones,” he says. “I’ve seen some offering a free lease of a car with your home purchase. Others offer wireless and fiber-optic networking pre-installed.”

Despite the higher cost of buying new, the gap between existing and new homes may be shrinking.

“I think new homes are becoming realistic options for some resale buyers because new prices are coming down,” Mr. Furnells says.

“Builders aren’t lowering prices everywhere, however. It’s more like there are small balloons around the region. Some are deflating, some are staying the same, and some are even inflating. There are $800,000 new homes selling in the Wheaton area, which is crazy. But in other markets, builders are dropping prices $100,000 — mostly on luxury homes,” Mr. Furnells says.

New-home sales have remained fairly steady in Maryland this year, falling just 2 percent in the first quarter. The regional slowdown in new-home sales is occurring almost entirely in Virginia.

In Fairfax County, for example, about 1,000 new homes were sold during the first quarter in the years 2002 through 2005. This year, however, just 579 have been sold.

Similar drops have been seen in Loudoun, Prince William and Arlington counties and Alexandria. Overall, new-home sales were down 42 percent in Virginia during the first quarter.

Contact Chris Sicks by e-mail (csicks@gmail.com).

The metro area includes the Maryland counties of Montgomery, Prince George’s, Anne Arundel, Howard, Charles and Frederick; the Virginia counties of Arlington, Fairfax, Loudoun, Prince William, Spotsylvania and Stafford; the city of Alexandria; and the District.