Reduced-priced New Homes Outpace Existing Homes by $33,500. Wealthy Property Magnate Grant Cardone Attributesthe Gap to Mortgage Rates and Other Strategies
According to Grant Cardone, a renowned real estate investor and entrepreneur, the pricing disparity between new and existing homes in the U.S. can be attributed to several factors.
Cardone's analysis reflects the intersection of structural market dynamics and homeowner psychology. Builders, for instance, have more motivation to sell due to inventories and construction debt. On the other hand, homeowners often have less motivation to sell due to low mortgage rates today, preferring to wait.
New homes, Cardone explains, are often located in less expensive markets, on the periphery of metropolitan areas or in regions with lower land costs. This is a strategic move by builders to keep costs down and make the homes more affordable.
However, there is a perception, or reality, that newer-built homes may have lower quality. Companies like D.R. Horton (DHI) have had a reputation for poor build quality in some accounts conducting home inspections on TikTok, which often go viral for finding vital flaws in newly built homes.
Despite this, selling unique homes is easier than selling identical homes in a subdivision. Existing homes may have higher prices due to interest and maintenance costs accumulated over time. They are frequently found in more established and pricier neighborhoods.
Cardone's perspective on housing affordability comes from active participation in large-scale real estate transactions. His real estate portfolio is valued in the billions, primarily in multifamily properties.
In an effort to keep sales moving when mortgage rates are high, builders turn to incentives like mortgage rate buydowns. Cardone suggests that sellers seeking maximum price should consider offering financing strategies like buydowns or short-term owner financing.
Despite the challenges, Cardone's remarks underscore the divide between professional developers and individual homeowners during periods of elevated mortgage rates. It's a complex issue with no specific data on the number of U.S. real estate companies known for lower quality in new construction like D.R. Horton.
Regardless, it's clear that the housing market is a dynamic and intricate system, one that requires careful consideration and strategic planning for both builders and homeowners alike.
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