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September 25, 2017

Why You Won’t See Many New Starter Homes

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Why You Won’t See Many New Starter Homes

Starter homes are harder to come by as builders struggle to offer more entry-level real estate options amid higher construction costs, a new study shows. Just 16 percent of new homes are selling for under $200,000, down from 44 percent in 2010, according to an analysis by research firm John Burns Real Estate Consulting.

The share of new homes priced between $200,000 and $400,000 has increased to 55 percent from 43 percent in 2010, and the share above $400,000 has more than doubled to 29 percent from 13 percent in the same time period, according to the analysis.

Building giants D.R. Horton, LGI Homes, and Lennar have recently touted their entry-level offerings, but the majority of builders continue to concentrate on the move-up market. Many say current market conditions aren’t suitable for cheaper homes. “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,” says Granger MacDonald, chairman of the National Association of Home Builders.

Source: “As Housing Affordability Weakens, More Buyers Are Left Out in Cold,” CNBC (Aug. 15, 2017)