March 27th, 2011 9:53 AM by Lehel S.
By Derek Kravitz
A new home, the dream of many would-be buyers, makes less and less financial sense in many places.
A wave of foreclosures has driven down the cost of previously occupied homes and made them even more of a comparative bargain. By contrast, new homes have become more expensive.
The median price of a new home in the United States is now 48 percent higher than that of a home being resold, more than three times the gap in a healthy housing market.
Such a disparity can be a drag on the economy. New homes represent a small fraction of sales, but they cause economic ripples, bringing business to construction and other industries. Sluggish new-home sales deprive the economy of strength.
"A lot of people are saying, 'If I can get a great deal on a home already on the market, why go through the headaches of getting a new home?'" says Mark Vitner, a senior economist with Wells Fargo. "There's a relatively small group of people who have the credit, have the down payment and are secure in their jobs that can go out and buy new."
The gap is widening because prices of previously occupied homes are falling fast, pulled down by waves of foreclosures and short sales. A short sale occurs when a lender lets a homeowner sell for less than they owe on their mortgage. New homes aren't directly affected by such sales.
The median price of a new home has risen almost 6 percent in the past year to $230,600. Slowed by those higher prices, new-home sales have plummeted in the past year to the lowest level since records began being kept in 1963. The government provides fresh data on new-home sales Wednesday.
By contrast, sales of previously occupied homes have fallen almost 3 percent in the past year. Prices have dropped more than 5 percent. In February, the median price for a resale was $156,100, according to the National Association of Realtors.