New Home Prices Continue To Increase

For the second time this year, Piedmont Realty and Construction is raising prices. I wrote about the first time this happened in January. Read it here. Here are some comments from Drew Holzwarth of Piedmont Realty Construction regarding this latest round of increases:

“All single family home neighborhoods will increase by $10,000, and our townhome and villa neighborhoods will increase by $5,000. The increase is necessary for two reasons. 1) Our manufacturers continue to increase prices with Atrium Windows, Whirlpool Corporation, and Bruce Hardwood flooring increases their prices 7-11% in the past 30 days. 2) Albemarle County will be increasing their tap fees on July 1. The ancitpated increase is $1890, but that amount is still to be determined by the Board.”

If you read my first post in January, the increases were a little more steep. Since the increases, Piedmont Realty and Construction as contracted for the construction of 45 homes for over $20 million in sales volume in 2012. That’s a 35% increase in number of sales and a 50% increase in volume this year over last year through May.

This is a great sign for the overall market. The new home market is often a leading indicator to the overall market. If builder and developers can find the value that releases demand, it helps set values across the board. Right now, the premium between new home values and resale values is growing. It’s not slowing new home sales and hopefully it will provide more stability and eventually upward pressure on resale values.

New home construction costs are just one element to the pricing of new homes. Land values are the primary driver to setting values, and overall supply and demand forces will ultimately sort things out. Development in this area has been slowed or halted on many projects during the last few years. Some of these new projects are getting close to emerging. Until then, there are some shortages in segments of the market for buildable lots. This will be the area to watch for the next several years to come to understand this market.