So-Cal Buyers Turning to New Homes for Investment

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The Real Estate Marketing Insider comments on news that buyers are, according to new statistics from Data Quick, preferring to invest in construction of new homes than purchase of existing ones.

REMI released its observations on today’s report that home buyers in Southern California are turning to new home construction for their investments, saying that it may help real estate agents as buyers prefer to invest in higher-value projects, thus raising commission levels.

As reported by Globe St., according to Andrew Adler, CEO of Los Angeles home-builder Alta Verde Group, home buyers, and particularly Baby-Boomers, are preferring to spend their real estate money building new homes over using them on existing units. A new study released by San Diego-based firm Data Quick points to similar conclusions: in the Coachella Valley, new home sales were up 35 percent in July 2012 from the same figure in July 2011. The median price of a new real estate site design is about $43,000 more than the average for an existing home, clocking in at $254,000.

This new data comes on the heels of the July study released by S&P/Case-Shiller (which REMI previously reported on) documenting a steady rise in home prices in major markets. That study, though, didn’t provide information on new-home prices versus resale-home prices. As Adler puts it, the buyer in the market for a new home is “of a different ilk” than a resale buyer, and so he feels that the two transactions should be treated differently.

Adler goes on to advance his theory about why new home sales are so brisk in the Coachella Valley and beyond. He blames a perfect storm of three market conditions: lack of inventory (largely because homebuilders are having a tougher time getting bank funding than they used to); product selection, especially in an economy like vacation rentals San Diego; and inexpensive credit available to home buyers. According to Adler, if all three of these conditions weren’t in place, there would be a “relatively soft” market for new housing.

Adler is the CEO of Alta Verde Group, a home-building firm that specializes in building designer, creative homes at affordable prices. Their product is specifically geared toward retiring or retired Baby Boomers who are hoping to scale down from a larger, previously-owned home. Since this group is such a key part of the new-home buyer demographic, Adler is very hopeful for his business. He says, “We’re doing very well catering to this market. We will have 100% growth in terms of volume from year to year.”

REMI released a statement regarding newly-reported statistics about new homes. According to Data Quick, Coachella-valley new home sales are up 35 percent from last year, and the median price of new homes has exceeded that of existing inventory by almost $45,000. Alta Verde Group CEO Andrew Adler comments, saying that new homes are the preferred outlet for prospective home buyers in this economy.

About Real Estate Marketing Insider: REMI provides real estate and marketing professionals with resources like hot new listings, trend analysis, and insider trade news. REMI is based in La Jolla, CA.

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