This month in Eagle, Idaho we see something unique. Home prices on newly constructed homes dropped. Could this be a chance to buy real estate in Eagle, Idaho at an affordable price?
Obviously, it depends on the situation. But as pre-existing home prices continue to climb (up 46.7% from last year and 5.3% from last month), new builds may present the best opportunity to own real estate. At least for now. More on this below.
Last month (August) new builds in Eagle averaged $589,900. This month (September), the average was $567,380. While this is nearly the same as last year (down 0.01%) it is down 3.8% compared to last month. (check out the graphic at the bottom of this article to get more details)
My New Build Experience
My buyer clients have started to consider new builds more often in the last year. The two main reasons are the reduction in competitive offers combined with affordable pricing. But this may be coming to an end.
The other offers
Unlike existing homes, new builds hit the market in a lot of different phases, ranging from bare dirt to a complete spec build. The days on market are longer because there is a lot more to consider depending on the phase it is in. This differs from an existing home.
As soon as an existing home hits the market, it is presented as a complete package. It is easy to see what it is, walk through it, and immediately comprehend what you are getting. In a heavy seller’s market, this leads to multiple offers in a matter of hours.
Generally speaking, an offer on a new build is not fighting against other offers. Your offer is considered, some back and forth happens, and if the buyer wants to move forward then the property goes under contract.
Buyers are also surprised (and pleased) when they see that they can usually get a similar home in terms of square feet for the same price or less than an existing home. There are often tradeoffs, including smaller lots or cookie-cutter neighborhoods. But when weighed against less risk (a one year home warranty) and being the original owner, lots of buyers are going in this direction.
The New Build Trend Is Changing
All good things must come to an end. And less competition with better pricing on new builds is likely in this category. Here’s what I’m seeing right now.
For the large development builders (think CBH, Hubble Homes, Coleman Homes, Boise Hunter) they are on to the fact that supply is so low that they are controlling a large chunk of inventory. I have seen at least two of these companies slow down the release of their lots and homes for sale. This keeps demand high and pricing high.
It’s hard to blame them. Eagle and southern Idaho are rural so we all understand the saying “Make hay while the sun shines”. The market won’t always be this hot. Take advantage while you can.
The price of supplies isn’t just affecting real estate in Eagle, Idaho
The pandemic had a major effect on sawmills, causing shutdowns and slowed production. As supplies became less available, the cost shot up, boosting the price of a home by $14,000 according to this Fortune article. This doesn’t just affect Idaho. It has hit the entire nation. And I’ve already seen evidence of this happening locally.
Reflects a reduced time on market
Though we see a reduced price on new builds, we also see a significant reduction in days on market. This is a leading indicator that a change is coming.
Have A Plan
Whether you want to buy a new build or an existing home, to get what you want you must have a plan when you make an offer. In this ultra-competitive environment, this is non-negotiable. Sellers have too many options and they will go with the offer that gives them the most security at the highest price.
When you find the house you want, you must be ready to pull the trigger right then. Hesitation will cause you to lose out on the home. And one thing that is hard to quantify but is very important: KEEP AN OPEN MIND. Sometimes we fall in love with the idea of what we want. But no house is perfect so being open to imperfections is an advantage.
Start with the bucks
The first part of your plan involves getting your finances in line. If you are purchasing in cash, you have a nice advantage. But if you are financing, you must have your ducks in a row before you make an offer.
Make sure you are pre-approved for at least the purchase price. Pre-approved is different and stronger than pre-qualified. Pre-qualified means that you have told a lender that you meet certain basic criteria but very little work has been done. To get pre-approved, meet with a lender (virtually if needed) and get them whatever they need to get the process started. They will likely ask for W2, pay stubs, and taxes.
Decide on your down payment. What is the maximum amount of cash you can put down without becoming cash poor? If the amount is over the minimum needed for financing, consider putting a little aside. This will reserve some cash in case the appraisal comes in low but you will want to purchase it. As you will see below, removing contingencies and creating security is very helpful.
Every standard Idaho purchase and sale agreement has built-in contingencies. These include passing an inspection, getting financing, a satisfactory home appraisal, and even the need to sell another home to pay for this one. Generally, the earnest money is tied to satisfying them all. Fail one of these contingencies and the buyer can end the contract and get back their earnest money.
Of course, sellers don’t really like this. They want security in their deal. So anyway that a buyer can eliminate some of these contingencies will give them an advantage against the other offers.
Answer the questions and address concerns
Sometimes the contingencies cannot be removed. So the next best thing is to get in front of questions that the sellers are going to ask.
Is the sale contingent on an appraisal? Consider writing into the contract that the buyer will cover any difference up to a certain amount. (See above about saving some cash from the down payment)
Is the sale contingent on selling another home? Consider making the earnest money non-refundable and then explain why the other home is going to close on time.
This is your new job (but it’s temp work)
Finding the house you want to buy takes more than a zip through Zillow and phone call. It takes a real commitment to finding, researching, and grabbing the home you want. I find the most success when I work with buyers that want to go shoulder-to-shoulder and are willing to put in a serious effort to their home search. They treat it like a job.
It can take 1, 2, 3, or more offers before you finally strike a deal. And if you have a minimum standard for your home, it becomes a numbers game. The most successful buyers have several homes to look at and are relentless until they get under contract. If they live out of state, they block off 2-3 days to stay in town and are ready to make an offer or two before they head home.
Finding a new home can be a challenge. But opportunities have opened up and there is always a way to sweeten the deal besides just the price point. Through planning, creativity, an open mind, and commitment, buyers will find their home.
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