Seizing Real Estate Opportunities: Trends in New Construction
Jul 28, 2023
Let's start out with a quote from a recent presentation I did for several local real estate brokerages to set the mood:
"The entrepreneur always searches for change, responds to it, and exploits it as an opportunity."
-Peter Drucker
The market provides us endless opportunity as it is always changing.
You just have to be seeking opportunity in order to find it. 🧐
Speaking of that, here are some opportunities I've found recently...
The Growing Divide in Real Estate
Breaking the real estate market into two components (new and existing homes) can uncover some trends worth noting.
In this graphic, you can see that there is a growth trend 📈 in new construction sales while existing home sales are declining 📉 since 2021.
This isn't too surprising as so much existing home inventory has been bought up since 2020.
Current owners are locked in at 3% on their mortgage so they aren't selling.
This leaves new construction as the main source of new inventory to the market and is part of why it is growing. 🏗️🏘️
You Get the House Plus...💰
If you've been active in real estate for the past 12 months, you have experienced a shift in seller strategies.
Before rates went up, it was how much can you squeeze out of the buyer. 🤑
Now, it's more balanced. If there's a mortgage involved, the negotiations are focused on seller credits/incentives in order to get a lower interest rate and lower closing costs.
To actually measure how much incentives have changed, I pulled the historical seller concession amounts to chart them over time.
The full post I did covered new and existing homes, but new construction really wowed me.
The average incentive to buyers when purchasing a new build is up 75% since the beginning of 2021. 🤯
Part of this is because they want to capture the business with their in-house lender and title company to keep profit as high as possible. They do this by giving credits to buyers if they use their preferred partners.
The other part of it is because buyers are requiring benefits like a 2-1 rate buy down and fewer closing costs to feel comfortable.
What It All Means
The main point we should take away from this is that the market is always changing and adapting.
It's a bit like running water and will find its way downhill to keep moving. 🌊
Understanding these trends will help you navigate your business to the growing sectors within the market. 👍🏼
Further, flowing with the market will help you to continually find opportunities rather than becoming frustrated because things aren't how they used to be.
Are there strategies you're holding onto that aren't effective any more? 🤔
That said, this information highlights the value of specializing in new construction moving forward.
It is a growing market and if rates stay higher, could be the primary source of business given the leverage the builders have to sweeten the deal. 💡
Go seize an opportunity!
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