Real Estate News About Woodbridge Virginia and Surrounding Communities

Driving around Prince William County, you will see new homes going up as fast as builders can pour foundations, and get those houses framed.

New home sales in the county are strong while resale home sales are down 20% compared to 2006.

What's going on?

Have we fallen into some spooky time-warp in which home buyers have been hypnotized by aliens and sent forth like zombies to new homes sales offices?

No.

New home builders like NV Homes, and Stanley Martin have slashed prices to undercut the sellers of existing homes.  Builders are giving more features, more value, for less money.

Owners of existing homes often cling to the highest price the market will allow, and often OVERPRICE their homes because they let their EMOTIONS get in the way of proper pricing.  "Our home is special".  "The house up the street sold for a zillion dollars two years ago, so that's what we want too".  "But we neeeeeed the money". 

Builders, on the other hand, apply facts, statistics, market research, and common sense when they undercut the resale market.  No emotions.  It's just business.

A community of new single-family homes just off the Prince William Parkway in Manassas had a big sign at the model homes that said, "Priced from the low $500's" last fall.  Over the holidays, a new sign went up saying, "Priced from the $380's" for the same models.

"Ah hah!  Those evil builders were gouging buyers at $500,000!  I knew it!!!", is a comment I heard at a party last night.

I can understand how one might come to that conclusion.

Just ask folks at random, "How much profit does a builder make from building a $500,000 house". 

I've asked that question from time to time.  I've heard a wide range of margins, and the average answer given to me is 30-40% of the price.

Try 7%.

"How do you know, Erick?"

Well, my wife's side of the family works in some facet of the home building industry.  My university, Trinity University offered a Bachelors Degree in home building back when I was a student. (Trinity later dropped the home building degree program)  So I have numerous college friends who own, or work for some of the large production builders.  So, I have the inside scoop on home building economics.

"So Erick, how can builders drop their base prices over $100,000 and not go broke if they were making only 7% profit at $500,000+?"

Believe me, the builders aren't sucking-up the loss.

 So who is?

The land developers who sell the finished building lots to the builders.

In days of old, a builder might develop the land by clearing and grading, then running water, sewer, electric, curbs, and streets through the comminity.

Not now.

In today's market, land developers buy raw land, build the streets, and run the utilities.  They create ready-to-build lots that they sell to builders.

Builders are the developer's only customer.  If the builder/customer stops buying more lots because the market rejects the price, the developer has to choose between no income to recoup their investment in infrastructure, or cut prices and keep their builder/customer in business.

Buyers beware.  When you buy a new home alone without a Realtor working for you as your buyers agent, you are at the mercy of a sophisticated selling system that builders have perfected into a machine that designed to reap the most profit from your pocket.

An experienced buyer agent who has years of experience working for buyers buying new homes.  A seasoned agent can steer you around the pitfalls that can suck thousands of dollars out of your bank account.

Best of all, you pay nothing extra to have an agent working for YOU because, by custom, builders pay your agent's fee.

One of those few chances in life to get something for nothing.

Erick