- The Washington Times - Friday, February 13, 2009

Only 11,233 new homes were sold in the Washington metropolitan area last year, a drop of 32 percent compared to 2007. Just a few years ago, in 2004, builders sold nearly 23,000 new homes - twice as many as they sold last year.

Existing homes weren’t selling so well in 2008, either. It was an especially hard year for builders. For many, it was their worst year in a very long time. My records go back to 1991. Throughout the 1990s, builders sold 25,000 to 30,000 new homes per year.

To download a PDF of the chart, click here.

At the beginning of this decade, sales in the Washington metropolitan area began to decline as new-home construction moved farther from the Beltway to where the available land is.

Last year, builders faced the additional challenge of being undercut by resale prices. New homes often cost more than resales, and because resale prices dropped so much last year, many buyers may have avoided new homes because of the cost.

In Prince William County, for example, resale prices were down 47 percent at the end of 2008. That made resales a real bargain there, with a median sales price in December of only $165,000.

By contrast, the median base sales price of new homes in Prince William was down by 17 percent last year, ending at $350,000 in December.

Builders cut prices last year to make their products more competitive, but they can only go so low. Homebuilders have to buy land, develop it, purchase construction materials and pay their workers. Those costs haven’t dropped much, if at all. Prices for resales, however, can just keep falling as far as the market will allow.

Of course, a new home has many advantages over a “used” one. Many of the homes in Prince William are inexpensive because they are foreclosures or rental properties in less-than-perfect condition. You can’t beat the feeling of a new home when you are the first one to live in it. There will always be buyers willing to pay a premium for new construction.

However, there didn’t seem to be enough of those buyers last year to make a difference for builders. Only 13 percent of total home sales last year were new homes. That’s the smallest share of residential sales builders have seen in at least 17 years.

It may be the smallest ever. By comparison, new home sales in the early 1990s made up about 35 percent of total home sales in the Washington region.

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

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