- The Washington Times - Friday, November 28, 2008

As bad as the existing-home market has been this year, sales of new homes have been even worse.

New home sales for the first nine months of 2008 were 33 percent lower than a year ago. Last year was a rough year. In fact, new-home sales have fallen 54 percent since 2005.

Existing-home sales, by contrast, have fallen by 38 percent since 2005. That indicates that buyers are a more interested in resales than new homes.

Another way of looking at it is market share - how many home sales were new versus resale. During the first nine months of the year, new-home builders only captured 13 percent of all home sales in the Washington region. Compare that to 15 percent in 2007 and 17 percent in 2006.

Of course, if you go all the way back to 1995, builders were getting 36 percent of total home sales. Since then, much of the available land in the metropolitan area has been built up, moving more new-home construction to places as distant as Berkeley County, W.Va.

However, unavailable land probably doesn’t explain a 4 percent loss of market share for new homes since 2006. More likely is the relative affordability of existing homes. Resale prices have fallen sharply, caused in part by foreclosures that pull down the value of nearby homes.

Builders have dropped their prices, too, but they can only lower prices so far because the cost of building materials and labor haven’t really fallen.

For example, the median price per square foot for a new home in Fairfax County is down 14 percent this year. However, resale prices in Fairfax were down 25 percent in September. In Prince William County (the largest new homes market in the region), new home prices are down 15 percent compared to a 43 percent drop in resale prices.

Virginia builders are having a rough year overall, with sales down 36 percent compared to a 28 percent decline.

Total sales are evenly matched this year, with each side of the river posting about 4,400 new home sales during the first nine months of 2008. Still, as recently as 2004, Virginia was outselling Maryland almost two to one.

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

The metropolitan 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.

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