Last Updated on Wednesday, 09 July 2008 16:11

Home prices in the Amherst New Hampshire area have dropped about 8% from last year and sales of single family homes are down 5% from last year. Land in the area, however has faired far worse this year. Land sales in the area have dropped 10% and prices on average have dropped 24%.

Existing home prices have declined from their peak in late 2005 but builders have not been able to stay competitive on pricing of new construction. There are three major cost components in the construction of a new home. Land, labor and material. The builders have little control over the cost of material which are now influenced by national factors and the price of fuel. Material costs over the last 3 years have increased about 10% per year. Labor costs can be controlled to some degree but they can not be brought down to the point where they have a significant impact on the overall price of a home. This leaves land as the one variable that can be controlled.

With the cost of building being so high there are fewer home buyers in the area willing to build. This has decreased the demand for land in the Amherst area. Of course with decreased demand comes lower prices. However, land prices did not start to come down until very recently.

Why? Land in Southern New Hampshire has become a commodity. There is less developable land in the area and the people who held it were not in a hurry to let it go, even as the market slowed, hoping the market would come back. Builders especially have been holding on to the land since a good building lot has been hard to come by. If a builder does not have land available, then they can not build and if they can not build they can not earn a living. So they have been slow to sell it off. It seems that sentiment is changing and land prices are coming down.

With land prices coming down the cost of building a home should also come down. We are in an adjustment period right now and new construction is a little bit behind the existing home market in terms of price adjustment. But it is starting to happen. The one unknown at this point is how high fuel prices will go and the affect of on the cost of building a home.

Existing home prices have declined from their peak in late 2005 but builders have not been able to stay competitive on pricing of new construction. There are three major cost components in the construction of a new home. Land, labor and material. The builders have little control over the cost of material which are now influenced by national factors and the price of fuel. Material costs over the last 3 years have increased about 10% per year. Labor costs can be controlled to some degree but they can not be brought down to the point where they have a significant impact on the overall price of a home. This leaves land as the one variable that can be controlled.

With the cost of building being so high there are fewer home buyers in the area willing to build. This has decreased the demand for land in the Amherst area. Of course with decreased demand comes lower prices. However, land prices did not start to come down until very recently.

Why? Land in Southern New Hampshire has become a commodity. There is less developable land in the area and the people who held it were not in a hurry to let it go, even as the market slowed, hoping the market would come back. Builders especially have been holding on to the land since a good building lot has been hard to come by. If a builder does not have land available, then they can not build and if they can not build they can not earn a living. So they have been slow to sell it off. It seems that sentiment is changing and land prices are coming down.

With land prices coming down the cost of building a home should also come down. We are in an adjustment period right now and new construction is a little bit behind the existing home market in terms of price adjustment. But it is starting to happen. The one unknown at this point is how high fuel prices will go and the affect of on the cost of building a home.