The cost of housing is rising at a fast clip, and nowhere is it more apparent than in the market for newly built homes.
Sales there are rising, but only on the higher end, and that is leaving the majority of entry-level buyers out of luck and out of homeownership because there are so few cheaper, existing homes for sale. While homebuilders claim they are trying to target the high demand from entry-level buyers, the numbers simply don’t show that.
More affordable homes, those priced under $200,000, made up 44 percent of the market in 2010. Today, they are just 16 percent of new, for-sale construction, according to research by California-based John Burns Real Estate Consulting.
During the same period, the share of newly built homes priced between $200,000 and $400,000 has grown to 55 percent from 43 percent. Going even further up the price scale, the share of new homes priced above $400,000 has more than doubled to 29 percent of the market from 13 percent.
While sales of newly built homes currently stand about 9 percent higher than they were a year ago, according to the U.S. Census, they remain well below historical norms, as does new construction of single-family homes.
Big builders like D.R. Horton, LGI Homes and Lennar do offer low-priced products, but the vast majority of builders are still concentrating on the move-up market. While they might like to offer cheaper homes, they say the current market conditions don’t allow for that.
“Rising material prices, particularly lumber, along with chronic shortages of buildable lots and skilled labor are putting upward pressure on home prices and impeding a more robust housing recovery,” said Granger MacDonald, chairman of the National Association of Home Builders and a developer from Kerrville, Texas.