The average price of new homes sold during the first ten months of 2014 was 11% higher than in the first ten months of 2013. By contrast, the average price of resale homes rose only 6%. The difference in relative price increases explains why there is a 3.8-month supply of resale homes compared to a 6.5-month supply of new homes. We have some standing finished inventory of new homes, a new development in 2014. With new homes selling for 39% more than resale, resale homes look like a bargain: a buyer can do a lot of renovating with $85,000, the average dollar difference between new and resale homes.
The chart below shows movement in the average price of new and resale homes sold during the first ten months of the last four years.
Total closings of both new and resale units during the first ten months are down 3.3% compared to last year but total dollar volume is up by 1.6% due to price increases. October units sold increased by 8.4% over last October, creating a strong start to the fourth quarter.