During the height of the housing boom, builders were putting up as many speculative (spec) homes as time and money permitted. After all, a steady stream of buyers meant homes were selling easily.
Then, the tide turned. The number of prospects was gradually reduced to a slow trickle and nearly dried up entirely. With no assurance that new properties would sell in a timely, cost-efficient manner, many builders – especially small to mid-size general contractors - put the brakes on spec homes for several years.
Now, as buyers continue their return to the market – sales of existing homes ticked up to the highest level in three and a half years according to the National Association of REALTORS® (NAR), and the supply of available homes remains tight - NAR reports inventory is almost 14 percent lower than last year, builders are once again making an investment in inventory homes.
When it comes to addressing the needs of buyers today, the big questions for builders right now are what to build, where to build and how much to build.
After waiting several years to finally pull the trigger, there’s no doubt that many buyers can’t or don’t want to wait for a home to be built in order to make their move. With first-time buyers coming back into the market strong, builders certainly want to have product that appeals to them ready to sell. The same goes for move-up buyers who now feel the time is right to test the water and list their current house for sale. Low inventories mean less time on the market for homes that are priced right, and these sellers may just turn into buyers much sooner than anticipated.
So, local builders hoping to provide the answer for these buyers know they need to have a home that’s ready or nearly ready for occupancy. Once a first-time buyer completes the pre-approval process, the next logical step is finding a place to call home. Similarly, once a seller goes under contract, they become a buyer. Without a product to offer these buyers, builders could potentially lose out on a large part of the market this summer.
Since homebuyers today are searching for the best deal they can find with the time and resources available to them, buying a recently complete or under-construction new home is certainly an attractive option.
Starting with the fact that everything is brand new, the biggest advantage to buying a spec home is that you get what you see. Plus, because spec homes also often serve as a builder’s model, they typically include the most requested design elements and features. Just as an existing model is the best possible selling tool for any builder, a spec home is another way for builders to demonstrate their unique brand of craftsmanship, appealing to both current homebuyers and future prospects.
Spec homes also address the needs of buyers who prefer to see a finished product because they have some reservations about the construction process and not knowing what their home will look like in the end. Another benefit is the fact that there is a great selection of spec homes right now – with a wide range of builders in a variety of desirable locations throughout the area to choose from.