A Glut of New Houses -- and What That Means for You

Nearly one-third of the region's new-home inventory sits in Prince George's and Loudoun counties, including this Toll Brothers development in South Riding Station. (By Elizabeth Razzi For The Washington Post)

Have you ever surveyed a neighbor's unkempt lawn or half-baked renovation and wondered if it might hurt your home's value? Glanced at houses near the halfway point on your commute and wondered if the time saved would be worth that neighborhood's premium price?

Then you understand very well how local -- as in right next door -- the "local" real estate market can be. It's just dandy to know that existing-home prices slipped 1.3 percent nationwide in February, but that little statistic is irrelevant when you're trying to arrive at a fair price for the house you're trying to buy or sell right here, right now. The fair price will be determined by your neighbors and by how much they were able to get for their very similar homes, sold very recently.

The local housing market -- rather, the many housing markets that make up the Washington area -- will be the focus of this new column, which you can expect to find here each Sunday. Week by week, we'll look at what national trends mean locally. We'll look at the broad range of issues that affect homeowners and those who are thinking of buying or selling in our increasingly expanding region. Your questions and comments always are welcome. Just send an e-mail to realestate@washpost.com.

Let's start by looking at one factor that will go far in determining what happens in the region's housing market. Even though builders have cut back on the number of new homes they're starting, they are finding themselves saddled with an unusually large inventory of finished or nearly finished homes. Those empty houses are expensive for builders to carry, thanks to construction loans that won't be paid off until the home is sold. So builders are getting serious about unloading them.

There are 40,409 new, single-family houses on the market in the Maryland and Virginia suburbs, according to Hanley Wood Market Intelligence, a construction-industry research company. That doesn't include condominiums, which are certainly in flush supply, or even townhouses. And nearly one-third of that unsold inventory sits in just two jurisdictions, Prince George's and Loudoun counties.

"Builders and developers have more inventory than they've had in recent memory, at least in a decade," said Charles Browning, publisher of New Homes Guide, an advertising magazine distributed free to home shoppers. (The magazine is published by a subsidiary of The Washington Post Co.)

Why should you care? Because if you are thinking about selling your house, new-home builders are your competition. And if you are thinking about buying a house, you should be aware of what is out there.

Even if the place you would like to sell is a three-bedroom Cape Cod near the Metro in Bethesda or a 1960s ranch house in North Springfield, potential buyers could be lured away by an irresistible deal on a spanking new house in Prince George's or Loudoun counties. And if you're trying to sell a two-year-old house in one of the same developments where these builders are trying to unload their inventory, good luck. The only way to compete with that new-home freshness is to lower your price.

So what are builders doing to sell their expensive inventory? Some are cutting base prices, some are throwing in free upgrades, and most are advertising their "quick delivery" homes aggressively. And that is where the deals are.

Look for special "quick delivery" or "quick move-in" pages on local builders' Web sites. Many, including Toll Brothers, D.R. Horton, Pulte, Ryland and Ryan, have such pages on their sites, listing specific homes for sale, one address at a time. New Homes Guide, for the first time, included a "move in now" supplement with its spring ad book. The Web site iNest.com, a new-home search site, has a roster of quick-delivery listings.

Many of these ready-to-own houses represent casualties of the subprime mortgage mess. Local real estate agents say they have been seeing loans, many of them arranged by brokers, fall through after lenders backed out -- or went out of business entirely. Zero-down loans and deals in which borrowers don't have to document their income aren't as easy to get these days. And that nixes new-home sales either because the buyers can't get their loan, or the people who had agreed to buy their old home back out of the deal.

"Houses that were under contract and for whatever reason have washed out, typically builders are a little more aggressive with them," says Boyd J. Campbell, a broker and owner of Century 21 Home Center in Lanham.

Some builders, instead of throwing in freebies such as finished basements and granite countertops, are lowering their base prices, according to Pamela Jones, an associate broker with Long & Foster in Loudoun County. "Some are really lowering the base price and getting people emotionally involved. Then they upsell all the bells and whistles," said Jones, who mainly handles resale homes. Some have lowered their base prices for single-family houses to less than $600,000, she said. "They're competing, and they're winning over some of the resales."

Until this backlog of unsold new homes is cleared, it will remain a tough market for owners trying to sell their gently used homes.