New construction has been in the news and is a big part of the housing recovery. In North Texas, we are seeing growth and a revival of new construction. Overall, Texas has been showing steady increases as many companies are relocating to Texas bringing jobs and driving demand for housing.
Appraising New Construction
Have you ever wondered how appraisers can perform an appraisal on new construction? Appraisers can appraiser homes that are not yet built. This is done by using what is called a "Hypothetical Condition" in appraising. A hypothetical condition is defined as - that which is contrary to what exists but is supposed for the purpose of analysis- per The Dictionary of Real Estate Appraisal. When we appraise new construction, we are appraising a property that is not yet in existence. We are provided the builders plans and specifications which we use to identify what the property will be once constructed. We will then find similar sales of properties to determine the value opinion of the proposed new construction. The appraisal is performed subject to completion of the proposed plans.
New Construction Data
Here is a look at new construction sales within our main counties in North Texas.
This chart shows the number of builder sales within Denton and Collin Counties from the North Texas Real Estate Information Systems, (NTREIS) MLS database. Note that not all new construction sales are listed in the MLS database. There are more sales in Collin than Denton County, but both show the same trends and a slight slow down in 2015.
Another source of data for new construction is the number of building permits per US Census Bureau. Here are the results for building permits for Single Family Homes for the past 10 years:
What’s Different About Buying New Construction -- Michael Roberts with Michael Roberts Custom Homes
Why it’s important to think of new homes just like new cars -- Ryan Lundquist-Sacramento Appraisal Blog