A Glut of New Houses — and What That Means for You

The Washington Post Sunday - - Real Es­tate - El­iz­a­beth Razzi

Have you ever sur­veyed a neigh­bor’s un­kempt lawn or half-baked ren­o­va­tion and won­dered if it might hurt your home’s value? Glanced at houses near the half­way point on your com­mute and won­dered if the time saved would be worth that neigh­bor­hood’s pre­mium price?

Then you un­der­stand very well how lo­cal — as in right next door — the “lo­cal” real es­tate mar­ket can be. It’s just dandy to know that ex­ist­ing-home prices slipped 1.3 per­cent na­tion­wide in Fe­bru­ary, but that lit­tle statis­tic is ir­rel­e­vant when you’re try­ing to ar­rive at a fair price for the house you’re try­ing to buy or sell right here, right now. The fair price will be de­ter­mined by your neigh­bors and by how much they were able to get for their very sim­i­lar homes, sold very re­cently.

The lo­cal hous­ing mar­ket — rather, the many hous­ing mar­kets that make up the Wash­ing­ton area — will be the fo­cus of this new col­umn, which you can ex­pect to find here each Sun­day. Week by week, we’ll look at what na­tional trends mean lo­cally. We’ll look at the broad range of is­sues that af­fect home­own­ers and those who are think­ing of buy­ing or sell­ing in our in­creas­ingly ex­pand­ing re­gion. Your ques­tions and com­ments al­ways are wel­come. Just send an e-mail to

realestate@wash­post.com.

Let’s start by look­ing at one fac­tor that will go far in de­ter­min­ing what hap­pens in the re­gion’s hous­ing mar­ket. Even though builders have cut back on the num­ber of new homes they’re start­ing, they are find­ing them­selves sad­dled with an un­usu­ally large in­ven­tory of fin­ished or nearly fin­ished homes. Those empty houses are ex­pen­sive for builders to carry, thanks to con­struc­tion loans that won’t be paid off un­til the home is sold. So builders are get­ting se­ri­ous about un­load­ing them.

There are 40,409 new, sin­gle-fam­ily houses on the mar­ket in the Mary­land and Vir­ginia sub­urbs, ac­cord­ing to Han­ley Wood Mar­ket In­tel­li­gence, a con­struc­tion-in­dus­try re­search com­pany. That doesn’t in­clude con­do­mini­ums, which are cer­tainly in flush sup­ply, or even town­houses. And nearly one-third of that un­sold in­ven­tory sits in just two ju­ris­dic­tions, Prince Ge­orge’s and Loudoun coun­ties.

“Builders and de­vel­op­ers have more in­ven­tory than they’ve had in re­cent mem­ory, at least in a decade,” said Charles Brown­ing, pub­lisher of New Homes Guide, an ad­ver­tis­ing mag­a­zine dis­trib­uted free to home shop­pers. (The mag­a­zine is pub­lished by a sub­sidiary of The Wash­ing­ton Post Co.)

Why should you care? Be­cause if you are think­ing about sell­ing your house, new-home builders are your com­pe­ti­tion. And if you are think­ing about buy­ing a house, you should be aware of what is out there.

Even if the place you would like to sell is a three-bed­room Cape Cod near the Metro in Bethesda or a 1960s ranch house in North Spring­field, po­ten­tial buy­ers could be lured away by an ir­re­sistible deal on a spank­ing new house in Prince Ge­orge’s or Loudoun coun­ties. And if you’re try­ing to sell a two-year-old house in one of the same de­vel­op­ments where these builders are try­ing to un­load their in­ven­tory, good luck. The only way to com­pete with that new-home fresh­ness is to lower your price.

So what are builders do­ing to sell their ex­pen­sive in­ven­tory? Some are cut­ting base prices, some are throw­ing in free up­grades, and most are ad­ver­tis­ing their “quick de­liv­ery” homes ag­gres­sively. And is where the deals are.

Look for spe­cial “quick de­liv­ery” or “quick move-in” pages on lo­cal builders’ Web sites. Many, in­clud­ing Toll Brothers, D.R. Hor­ton, Pulte, Ry­land and Ryan, have such pages on their sites, list­ing spe­cific homes for sale, one ad­dress at a time. New Homes Guide, for the first time, in­cluded a “move in now” sup­ple­ment with its spring ad book. The Web site iNest.com, a new-home search site, has a ros­ter of quick-de­liv­ery list­ings.

Many of these ready-to-own houses rep­re­sent ca­su­al­ties of the sub­prime mort­gage mess. Lo­cal real es­tate agents say they have been see­ing loans, many of them ar­ranged by bro­kers, fall through af­ter lenders backed out — or went out of busi­ness en­tirely. Zero-down loans and deals in which bor­row­ers don’t have to doc­u­ment their

that in­come aren’t as easy to get these days. And that nixes new-home sales ei­ther be­cause the buy­ers can’t get their loan, or the peo­ple who had agreed to buy their old home back out of the deal.

“Houses that were un­der con­tract and for what­ever rea­son have washed out, typ­i­cally builders are a lit­tle more ag­gres­sive with them,” says Boyd J. Camp­bell, a bro­ker and owner of Century 21 Home Cen­ter in Lan­ham.

Some builders, in­stead of throw­ing in free­bies such as fin­ished base­ments and gran­ite coun­ter­tops, are low­er­ing their base prices, ac­cord­ing to Pamela Jones, an as­so­ciate bro­ker with Long & Fos­ter in Loudoun County. “Some are re­ally low­er­ing the base price and get­ting peo­ple emo­tion­ally in­volved. Then they up­sell all the bells and whis­tles,” said Jones, who mainly han­dles re­sale homes. Some have low­ered their base prices for sin­gle-fam­ily houses to less than $600,000, she said. “They’re com­pet­ing, and they’re win­ning over some of the re­sales.”

Un­til this back­log of un­sold new homes is cleared, it will re­main a tough mar­ket for own­ers try­ing to sell their gen­tly used homes.

BY EL­IZ­A­BETH RAZZI FOR THE WASH­ING­TON POST

Nearly one-third of the re­gion’s new-home in­ven­tory sits in Prince Ge­orge’s and Loudoun coun­ties, in­clud­ing this Toll Brothers de­vel­op­ment in South Rid­ing Sta­tion.

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