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The higher-priced new homes help to accelerate the values of existing homes.  All sellers have to do is undercut the price of new tracts nearby – if there are any! HT to daytrip for sending this in from the latimes.com:

http://www.latimes.com/business/la-fi-new-home-prices-20141014-story.html#page=1

Southland new and resale house prices

Builders have piled in to pricey ZIP Codes — bidding up land costs there in the process — and polished their projects to a high gloss to woo wealthy buyers with cash or good credit.

“Builders have been focusing very heavily on the move-up market as opposed to entry level,” said Bradley Hunter, chief economist at housing research firm MetroStudy. “There’s a simple reason: That’s where the profits are.”

Meanwhile, projects aimed at the middle of the market remain scarce, and overall home building is off about 60% from a decade ago. The shortage of new lower-priced product is one factor making Southern California among the toughest housing markets in the country for middle-income families.

New homes have almost always sold at a premium. They come with bells and whistles — including energy-efficient appliances and often a warranty — that a decades-old house can’t match. But that premium has hit new highs this year.

In January, the gap between median-priced new and resale homes in Southern California peaked at $151,000, a 41% premium for a new house. And although it has eased a bit since, it has been larger than $100,000 in nine of the last 10 months, compared with an average of $38,000 over the last 25 years, according to CoreLogic’s figures. The same trend is playing out nationally, though in less dramatic fashion.

Higher-end home builders see this dynamic too, and they’re gobbling up what land is left. Luxury builder Toll Bros. acquired 3,200 lots in Southern California this year when it bought Shapell Homes, part of its plan to expand from its East Coast base into higher-growth markets. Now Toll is working on five new communities, from Santa Clarita to Carlsbad, in prime spots with good schools. It will start selling homes next year, said Jim Boyd, head of Toll’s California operations, and expects to do well.

“I think the market is pretty strong,” he said.

Read full article here:

http://www.latimes.com/business/la-fi-new-home-prices-20141014-story.html#page=1

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