Builders Raising Prices, Limiting Supply

Those looking to buy new homes will likely start to see price hikes, and possibly a smaller selection. Many of the nation’s builders say they’ve had to increase prices due to the rising costs of land, labor, and materials.

For example, Pulte’s sale price, on average, has increased 10 percent to $287,000 in the first quarter of this year. Meanwhile, the average existing home price was $233,200 in March, according to the National Association of REALTORS®.

“Builders are feeling pinched by rising costs of key building components which is causing home construction costs to rise at a faster pace than appraised values,” says David Crowe, chief economist of the National Association Home Builders.

Some builders are limiting sales in order to keep prices higher.

“We are pricing our homes and limiting the number of lots we’re releasing for sale in some communities to better manage our order volumes relative to our production capacity, and to maximize our profit from those communities,” Meritage CEO Steven J. Hilton wrote in the company’s quarterly earnings report recently.

Source: “Despite Rising Demand, Some Builders Slow Production,” CNBC (April 25, 2013)