Six years after the bottom dropped out of the housing market, builders are finally starting to reclaim their traditional share of sales, according to marketing and research firm John Burns Real Estate.
During the downturn, new home sales slid from 16% percent of total transactions to a mere 5%. That dropped the traditional ratio of new-to-existing home sales from five-to-one “all the way” to 17-to-one, says Rick Palacios Jr., a senior research analyst at the Irvine, Calif., company.
Now, new home sales are accounting for 8% of total sales, narrowing the new to existing home ratio back to 12-to-1.
“Despite the fact that the new home market suffered disproportionately compared to the existing home market during the downturn, new home sales are now outpacing resale sales on an annual basis,” says Palacious.
The turnaround is still fragile, though, and conditions are such that the spread that could widen “very quickly,” the analyst warns.
One situation which could impact the ratio is the lack of development opportunities, which could cause new home sales to slow. Another is the possibility that “sloth-like foreclosure departments” at banks could accelerate their REO sales. If they finally get their acts together, Palacious says, builders could once again lose their traditional market share.
In the long term, though, the Burns analyst fully expects builders to eventually recapture their traditional 15% of total housing sales.