Price hikes squeeze out some home buyers

Home News Price hikes squeeze out some home buyers

home buyersWashington, D.C.—Home buyers in the bottom quarter of the market have been squeezed entirely out of the market for new construction due to a mismatch between actual prices of new homes and prices that buyers expect to pay, according to data released by the U.S. Census Bureau and the Department of Housing and Urban Development, combined with recent National Association of Home Builders (NAHB) survey data.

According to the NAHB, the buyers have been forced to look exclusively in the stock of existing homes as a result, where the inventory of homes available for sale remains in a historically low range at a 2.5-month supply, with a six-month supply typically acting as a balanced market.

NAHB tabulation of recently released data from the HUD/Census Bureau Survey of Construction showed that the median price of single-family homes started in 2020 and built for sale was $336,000. The vast majority (79%) were priced between $250,000 and $1 million. Virtually none were under $150,000 (only 1% between $100,000 and $150,000 and none were under $100,000).

In contrast, the 2021 edition of NAHB’s “What Home Buyers Really Want” (based on a representative sample of 3,247 recent and prospective home buyers conducted in the summer of 2020), showed the median price home buyers expect to pay for a home is about $265,000. Half are looking to pay $250,000 to $1 million and a quarter are looking to pay less than $150,000.

In other words, the 2020 new construction of homes was providing essentially no product for the bottom fraction of the home buying market, the NAHB said. Moreover, in 2021 the situation is likely to be worse, given the median price of a new home in May 2021 was up 18% from a year earlier at $374,400.

In addition to the 25% of buyers looking to pay under $150,000, it is likely that builders in many parts of the country are now unable to accommodate a substantial share of the 22% looking to pay somewhere between $150,000 and $250,000, according to the NAHB.

The growing affordability crisis is due in large part to supply chain disruptions resulting from the COVID-19 pandemic, the NAHB said. The change in lumber costs between April 2020 and April 2021 added more than $35,000 to the price of an average new home. In May, builders reported that material costs in general had increased 26% from a year earlier.

The widespread shortages are not just limited to building materials—builders are also grappling with a dearth of workers, as the number of open construction jobs increased to 357,000 in April. On top of this, the NAHB estimated that regulation is now accounting for over $93,000 of the price of an average new home.

Buyers unable to find new homes in their price range are also likely to have increasing difficulty finding something in the market for existing homes, which have registered large price hikes as well, the NAHB said. The median sales price for existing homes in May was $350,300, up 23.6% from a year earlier, and the 111th consecutive month of year-over-year increases.

Must Read

Credit: A valuable tool for flooring retailers

By Jacqueline Hinchcliffe—Today, consumers want what they want, when they want it. But they don’t always have funds available to make a purchase—especially when...

The Tool Locker joins Fuse Alliance

October 14, 2021—Fuse Alliance, a member-owned organization of professional commercial flooring contractors, welcomes The Tool Locker as a new supplier for the network. Based in Chicago and...

Retail sales rose 0.7% in September

Oct. 15, 2021—A newly released report from the U.S. Commerce Department showed retail sales rose 0.7% in September. Some of the categories that accounted...

CALI engineered bamboo flooring gets a refresh

San Diego, Calif.—CALI, the omni-channel flooring and decking company, has added four new colors to its engineered bamboo flooring collection. Engineered planks feature a stratified design, layering solid bamboo over a sustainable wood...

NeoCon ’21: Exhibitors key in on design

By Ken Ryan—Chicago—Like many in-person events during the age of COVID-19, NeoCon endured postponements and schedule changes that wreaked havoc with its goal of...

Mohawk Roadshow 2022 to kick off in January

Calhoun, Ga.—After putting the “new normal” to the test this year with its successful 2021 Mohawk Momentum Roadshow, Mohawk said it will be back...
Some text some message..