Half of the respondents to a recent Big Builder Online survey on pricing power said they believe new-home sales prices have stabilized in their markets. However, 40% of respondents said prices have not stabilized, while the remaining 10% said they were unsure.
Even if new-home sales prices have stabilized in some markets, the majority of respondents--40%--said they have not raised home prices in the past six months. "Our market is still feeling the effects of foreclosure, short sales, unemployment, and the reality of the home buyer not being able to sell their existing home. We cannot raise prices, as we really need sales to stay alive," noted one respondent.
However, 30% of respondents said they have increased prices over the past six months, and the remaining 30% of respondents said they haven't increased prices yet but are considering it. "I have raised prices 1% four times in 2010--every six homes sold, the price goes up approximately $2,500 per home," said another respondent.
Opinions varied on what absorption rate is appropriate for considering to raise home prices in a community: 30% said more than 5 sales per month, 20% said 4.1 to 5 sales, 20% said 3.1 to 4 sales, 20% said 2.1 to 3 sales, and 10% said 1.1 to 2 sales.
For those builders who have raised prices, 20% said they raised prices between 10.1% and 12.5%, 20% have raised them between 1.1% and 3%, and 20% have raised them less than 1%.