Tuesday, May 06, 2014

Home buyers want new, but don't want to pay for it

In March, the median sale price for an existing home was $198,500, according to the National Association of Realtors. The median price for a newly built home was $290,000. While some of that premium can be attributed to the fact that builders are now focusing more on higher-end buyers, and therefore building more luxury homes, there is in general at least a 20 percent premium for new construction...Unfortunately for the builders, just 46 percent of the people who strongly prefer a new home are willing to pay the 20 percent premium that new homes typically cost. And even fewer of those who said they somewhat prefer a newly built home would pay the higher price. In total, just 17 percent of those who said they prefer new would actually pay for new.
Thanks to Fred Pilot for this link. Builders are catering increasingly to the affluent. The 1995-2006 housing boom was in part fueled by efforts to expand homeownership down the income distribution. That's all over now. The home ownership rate is falling, more people are renting, and the new housing market is for the wealthy. The rest of us can accept trickle down housing, as Anthony Downs described back in 1975

1 comment:

IC_deLight said...

Given that all the new housing is HOA-burdened housing - maybe consumers have realized that the product isn't worth what developers are trying to sell it for. A $200,000 house that restrictions are added to isn't worth $200,000. A $200,000 house with perpetual liens that can never be paid off isn't worth $200,000. If people have a choice, rational informed consumers will not choose HOA-burdened housing.