- The Washington Times - Thursday, April 7, 2011

I would apologize to home builders for the painful news in this column, but they already know how bad things were in 2010.

For those of you who don’t know, 2010 was the worst year for Washington’s home builders in at least two decades.

Fewer than 9,000 new homes were sold last year, compared to more than 20,000 in 2006. It only gets worse the further you look into history. In 1999, when sales were good and there was more available land for new houses, area builders made more than 30,000 sales.

As you can see in the charts, the downward slide in sales activity was halted briefly in 2009 by the federal homebuyer tax credits. Without that incentive, however, both the new and existing-home markets saw sales decline in 2010.

The existing-homes market is bouncing back rather well in 2011, but that doesn’t mean the new-homes market necessarily will follow. Two reasons: supply and pricing.

The supply of homes in the Washington-area is still higher than the demand. Builders are in the unfortunate position of looking around the region and seeing many inexpensive homes for sale that already have been built. There were 24,000 of them available for sale at the end of February. That is a lot of competition for area home builders.

Builders, of course, can offer you a brand-new home that no one has modified or damaged. New-home buyers get to start from scratch and even have some control over furnishings and paint and flooring. Those are some of the definite advantages of buying new.

It does, however, come at a cost. Pricing is the other hurdle builders face. In today’s charts, you can see that the median sales prices of new homes across the region mostly increased in 2010. Even when the market is down, the cost of building materials, labor and overhead continue to rise.

Prices for existing homes in Virginia also increased in 2010, yet an existing home is still less expensive than a new one.

In Fairfax County, the median price for new homes sold in 2010 was $592,000, compared to $385,000 for existing homes. In Montgomery County, it wasn’t quite as bad: $466,000 for new homes versus $350,000 for existing homes.

Send email to csicks@gmail.com.

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