A professional advised me to acquire a residential property through a mortgage loan.
Updated on July 1, 2024, builders dug their heels in, declaring prices wouldn't budge. Now, analysts are spilling the beans about plummeting prices in new construction projects. The upward spiral in prices has ground to a halt, with some projects even seeing reductions. At least, the signs are pointing towards a market-wide price decrease. It's crucial to assess your resources, they say.
An insider advised, if you've got the chance, to apply for preferential mortgages, but steer clear of purchasing a home if you can only qualify for market rates. Konstantin Aprelev suggests stashing your dough in a deposit and keeping a close eye on changes in the central bank's key rate instead.
The vice-president of the Guild of Realtors also tossed in a word about tranched mortgages. This nifty option benefits buyers by freeing them from mortgage payments during the construction phase. If your bank doesn't offer this, give the builder's completion date and their track record a hard look. He suggests choosing properties that will be finished in the current quarter or this year.
On April 1, 2025, the bigwig CEO of "Dom.RF", Vitaly Mutko, spilled the beans to President Putin about the potential risks of reducing the volume of housing construction in 2027-2028 and a hike in real estate prices. He shed light on how sky-high interest rates have dampened demand, causing Russians to postpone buying homes, favoring bank deposits instead. However, when the dam bursts and folks start withdrawing their cash, a shortage of housing could crop up, leading to escalating prices, he warned. In response, President Putin demanded clarity on mortgage lending be shared with the public.
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Enrichment Insights:
New Home Prices Slumping Nationwide (2024-2025)
The Big Picture
New home prices have tumbled for a whopping eight consecutive quarters through Q1 2025. Specifically, the median price for new single-family homes shrunk by 2.32% from Q1 2024 to Q1 2025, dropping to $416,900. This decline clashes with the upward momentum of existing home prices during the same period, which swelled by 3.38% year-over-year[1][3].
The Impact
- Partial Equalization: The price disparity between new and existing homes is diminishing dramatically, standing at just $14,600 in Q1 2025, down from a jaw-dropping $64,200 in Q4 2022. This shrinking gap offers frugal buyers a wider selection between new and pre-owned homes.
- Market Woes: The housing market is still reeling from problems like high interest rates and constrained inventory, particularly in entry-level markets[1]. This turbulence has compelled developers to slice prices and offer incentives to prospective buyers[4].
- Economic Headwinds: Elevated construction costs and dampened demand due to higher mortgage rates contributed to the decline in new home prices[3][4].
Factors Inducing Price Drops
- Steep Interest Rates: High mortgage rates have weakened demand for new homes, pushing developers to axe prices and dish out rewards to buyers[4].
- Construction Expenses: Although construction costs have eased somewhat, the hefty costs from earlier years have lingered, affecting developers' pricing choices[3].
- Swinging Preferences: Changes in consumer preferences and economic forces have fueled shifts in the demand for new versus existing homes[1].
Forecasts for the Future
- Moderated Price Growth: Estimates suggest that overall home-price appreciation will decelerate in 2025, potentially averaging 2% instead of 4.5% in 2024[4]. New home prices are expected to remain affordable due to continual price reductions and enticements from builders.
- Regional Fluctuations: Regions with an abundance of inventory are more likely to see price drops, while places like Miami, Boston, and Denver may maintain price increases[4].
- Economic and Interest Rate Factors: The course of interest rates and economic recovery will play vital roles in shaping future housing market trends[4].
All in all, the trend of falling new construction prices reflects broader economic issues, market fluctuations, and strategic decisions by developers. As the housing market evolves, understanding these dynamics will help predict future trends.
- If you're planning to buy a home, it's recommended to consider applying for preferential mortgages, as they offer competitive rates, but be cautious about purchasing if you can only qualify for market rates.
- With new home prices slumping nationwide, it's crucial to closely monitor changes in the central bank's key rate and interest rates, as they have a significant impact on mortgage lending and home demand.
- As developers adopt strategies to stay competitive, tranched mortgages can be a beneficial option for buyers, allowing them to avoid mortgage payments during the construction phase, especially for properties scheduled for completion in the current quarter or this year.
