Is there a new build bubble?

2 Replies

I live in northwest Houston (Cypress) TX. Looking at new construction houses and they seem a good bit higher than older ones. For example a house that is a 2016 build might sell $450-500k as a new build seems to be about $600-650. Is this normal or are we seeing a bubble due to building material inflation that will come back down? I don't know how to value the difference between new vs a few years old.

Hello @Aaron White

Certain locations and new construction projects can definaly be "reaching" for a higher price target than the market will allow. If they are able to sell them, then that is the new price for these new-builds. If they can't sell for their target price (either lender or market demand restrictions) then the builder may settle for a lower price point.  

The word "bubble" suggests a "pop" in the market. That's hard to predict. In your example, it's would be safe to suggest that there is room for price reductions if the supply of homes begins to surpass demand. In the next few months, we'll hear sorties of a softening market but that's not to say that we won't see buyer demand sustain the higher purchase price for years to come. I would still be bullish for the long-term in these high-growth markets just not on the high-end products. 

@Aaron White I'm in Katy and I haven't seen the spready be that wide here, but not I'll be looking for that.  It seems like the builder is pushing prices faster that what actually supports it.  The only other thing that might make sense is if the lowest priced resale home have less upgrades, lot size etc.  I don't think most people would pay 150k more just because a house is 5 years newer. 

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