Home builders have been rushing to fill the need for more homes over the last two years, but now with the economy slowing, their inventory is piling up.
- Luxury homes were selling faster than builders could make them just a few years ago. Now, the home sales have plummeted.
- In Austin, Texas, luxury home sales fell 37.6% this summer compared to last summer. Overall luxury home sales fell 28.1%.
- The dramatic drop in home sales poses a problem for builders who were previously selling homes even before they were completed.
Why it’s news
Inventory on luxury homes is on the rise as overall home sales slow, concerning builders who are unable to fund buyers. Some builders haven’t made any land purchases this year, but are still finishing up housing projects that are likely to sit on the market.
Builders bought land at premium prices and built luxury homes, expecting to sell them for top dollar amounts. Now, if developers aren’t able to find buyers, they will have to start selling their new homes at a loss.
While the overall housing market is experiencing a housing shortage, expensive luxury homes aren’t what’s needed to fill that gap.
Buyers in areas like Austin who bought million-dollar homes just last year may now see their home value drop dramatically as the price of land is falling back down.
Neighborhoods in Austin like Zilker and Barton Hills had lots that sold for $300,000 in 2014. In 2019 and 2020, those same lots sold for closer to $750,000 to $800,000. In 2021, some builders were paying around $1 million for a teardown project.
As homes sit longer on the market, builders are starting to lower their prices.