Income Disparity Between New and Existing Home Buyers Widens

New research from NAHB finds a growing disparity between the median income of all home buyers and the median income of new home buyers.

According to the 2011 American Housing Survey (AHS), home buyers overall had a median income of $64,998.  The subset of home buyers that bought new homes had a median income of $81,715, about 26 percent more than the median income of all home buyers.  This spread is the largest it has been since before the 2001 AHS.

Graph 1. Percent Above or Below the Income of All Buyers

graph1

The subset of home buyers that bought a home for the first time had a median income of $59,946, about 8 percent less than the median income of all home buyers.  The disparity between the income of all home buyers and first-time home buyers is shrinking—this spread is the smallest we have seen since before the 2001 AHS.

New home buyers are purchasing more expensive and larger homes when compared to all home buyers.  The median market value of a new home purchased is $230,000 and the median size is 2,100 square feet.  According to NAHB’s recent report “What Home Buyers Really Want” , buyers expect to pay a median of $203,900, and would like a median of 2,226 square feet.

The median value of all homes purchased dropped $35,000 between 2007 and 2009, but only $10,000 between 2009 and 2011.  The median value of new homes purchased was stable at $230,000 in both 2009 and 2011.

Graph 2. Median Market Value of Homes Purchased

graph0

Between 2009 and 2011, 1.6 million fewer households bought a home than between 2007 and 2009—8.4 million households bought a home in the 2009 study, compared to 6.4 million in the 2011 study.  Of those that bought a home, only 8 percent bought a new home.  This is down from 17 percent of households who bought a new home in the 2009 study.  According to “What Home Buyers Really Want”, 55 percent of home buyers (prospective and recent) would prefer to purchase a new home.

 



Tags: , , , ,

0 replies

  1. It’s no surprise that fewer new homes have been purchased since 2009, because foreclosures and short sales for cents on the dollar were fare better deals. I’m just curious to know how much more foreclosure inventory is still out there. Tough to make money on new construction, when those options are out there!

  2. This serves to verify the overall weakness of the move-up market, including new homes. The existing home market is extremely heavy in first-time buyers who tend to be younger and less affluent. The new home maket has traditionally been heavily dependent upon move-up buyers who no longer have access to large sums of home equity to cover the acquisition cost of a new home. They are being replaced to some degree by more affluent first-time buyers who are forming families later in life after establishing a career. As to how much distressed inventory is still out there, the last estimate I saw on the shadow inventory was 2.3 million units and, while that is down, the number is still very scary.

  3. I am not certain if the data as presented can lead to any meaningful conclusions regarding buyer incomes..

    Would not new homes, if higher priced than the average resales as I assume them to be from my experience and your statement “New home buyers are purchasing more expensive and larger homes when compared to all home buyers”, tend to axiomatically require and equate to higher incomes?

    Would not a more realistic conclusion (and a more appropriate headline) be that new homes tend to be priced higher than the average resales and further that the average price of a new home purchased by a first time buyer is rapidly approaching the average price of all resales?

    • New homes are priced above average resales, as you say (and as the 2nd graph shows), and so you’re right to point out that this logically equates to higher incomes for buyers of new homes. But this is widely known, and the point is not that the income difference exists, but that it’s getting bigger. This is less widely known and would be difficult to demonstrate without tabulating the new data the way Heather has.

      Her tabulations didn’t look specifically at the price of new homes purchased by first-time buyers. It would be legitimate to point out that the average price of all homes purchased by first time buyers has gotten closer to the average price of all home sales. A logical follow-up question would then be whether any of this is attributable to the Home Buyer Tax Credit, which was in effect during part of the time analyzed and initially targeted first-time buyers.

      The full article goes into more detail on points like this.

Trackbacks

  1. » Income Disparity Between New and Existing Home Buyers Widens HBA of St Louis & Eastern Missouri
  2. Eye on the Economy: Builders’ Worries Rise with Improving Markets « Eye on Housing
  3. Maupin Development » Eye on the Economy: Builders’ Worries Rise with Improving Markets
  4. Income Disparity Between New and Existing Home Buyers Widens

Leave a Reply

Your email address will not be published. Required fields are marked *