Eye On Housing
New data released by the U.S. Census Bureau and the Department of Housing and Urban Development, combined with recent NAHB survey data, show a mismatch between the actual prices of new homes and the prices buyers expect to pay—providing further evidence for the growing problem of housing affordability.
At the end of August, the Census Bureau released 2018 data from the Survey of Construction. This is the survey that generates the familiar series on housing starts and new home sales. NAHB tabulation of the data shows that the median sales price of single-family homes started in 2018 was under $322,000. Nearly three quarters of them (73 percent) were priced between $250,000 and $1 million. Only 3 percent were under $150,000, and none at all were under $100,000.
In contrast, the 2019 edition NAHB’s What Home Buyers Really Want (based on a 2018 survey of approximately 4,000 recent and prospective buyers) showed that the median price buyers expect to pay is about $254,000. Fewer than half expect to pay $250,000 to $1 million. A full 27 percent are looking to pay less than $150,000, and 12 percent even want to pay under $100,000.
The reasons for this mismatch at the low end are not mysterious. Factors such as the ongoing shortages of labor and lots, and escalating regulatory costs have made it difficult to impossible to produce a new home at these lower price ranges. This obviously is forcing a significant share of buyers into the market for existing homes only. However, the market for existing homes has been very tight recently. The months’ supply of existing homes reported by the National Association of REALTORS® has been consistently under 4.5 for over two years.
With cost factors preventing new homes from being built at prices they can afford, and a limited number of existing homes available on the market, many buyers are left with few options beyond voicing their affordability concerns.
If affordability is a problem with interest rates under 4%, the real problem is not affordability but the unreasonable expectations of todays buyers. It could very well be a generational thing but perhaps some effort should be made to help them understand current real estate values.
Inflation has been understated. Housing is the true basket of goods and services and government regs. These have far outstripped wage increases in most areas. The idea first time home buyers are going to be a major force doesn’t make sense. No one talks about changes outside of wages. As a former lender in the 90s and early 2000,s ratios were around 30% housing & 40% for total monthly debt. Today many you g families have large student loans that distort the money available for housing. Add to that tech costs like internet and expanded cable and cell phones and you reduce disposable income for housing even further as they were not an issue in the 90s. Health insurance has also outstripped inflation and is another hit on net pay checks. Increasing rations is the path to another housing bubble.
yes totally agree