MRED Blog

By:  Tara Steele/AG Beat

The builders’ challenge

Despite builder sentiment rising for the last five months, new home construction remains one of the hardest hit sectors in the housing industry as lending remains tight and a glut of foreclosure is dragging down prices nationally and reducing the chance of healthy margins. The large inventory of distressed sales has been problematic for builders since the crash, and the battle has been waged by builders to educate consumers on the differences between buying a new home versus a distressed home.

Arizona builder, Fulton Homes is marketing their new Foreclosure Calculator that offers detailed cost comparisons between a new home purchase and the purchase of a foreclosed home, taking into account condition, size, repair estimates, size and other factors.

A 50% cost increase?

As an example, a 1,755 foreclosure home in Arizona listed for $81,500 in “Poor” condition that has outstanding liens but no current occupants will cost an average of $42,908 cash investment in the form of repairs, appliances, painting and the like, making the total investment $124,408.

Some consumers believe that the $81,500 price tag is their cost, but when buying a distressed home, it is often much more. With the attention turning to the deals to be found with foreclosed homes, builders like Fulton are launching a full out attack to promote the idea that new homes can be less expensive in the long run and you know what you are getting.

After each cost comparison, Fulton offers homes in the same price range that require no work or additional investment, showing slick photos of community amenities and clean floorplans.

The inventory of foreclosure homes will increase in 2012 as the backlog begins clearing after the robosigning scandal and lawsuits are settled, and new home builders have to be more out front like Fulton Homes if they want consumers to choose their product over what appears to be a less expensive option.