New Construction Homes Are Increasingly Out of Reach for Many Buyers
The affordability gap will probably be worse next year.
One out of four would-be home buyers couldn’t afford new construction in 2020, says the National Association of Home Builders in a new report.
This year is likely to be worse.
The association came to the conclusion after examining new data released by the US Census Bureau and the Department of Housing and Urban Development along with the results of NAHB survey information.
“In addition to the 25% of buyers looking to pay under $150,000, it is likely that builders in many parts of the country are now unable to accommodate a substantial share of the 22% looking to pay somewhere between $150,000 and $250,000,” the home builders group says.
The median price of single-family homes started in 2020 and built for sale was $336,00, according to data from the HUD/Census Bureau Survey of Construction. The vast majority (79%) of new homes were priced between $250,000 and $1 million. Virtually none were under $150,000 (only 1% between $100,000 and $150,000 and none were under $100,000).
NAHB attributed the growing affordability problem in large part to supply chain disruptions resulting from the COVID-19 pandemic.
Lumber, which added $35,000 to the average price of a new home from April 2020 to April 2021, was listed as a major factor for the affordability issue.
A shortage of workers and an over abundance of regulations were also given blame.
NAHB recently estimated that regulation is now accounting for over $93,000 of the price of an average new home.
Many home buyers who have had to look at existing homes in the wake of the price increases have had this option shut off to them as well, since these units have also seen hefty price hikes, said NAHB.
The group pointed out the median sales price for existing homes in May was $350,300, up 23.6% from a year earlier: the 111th consecutive month of year-over-year increases.
NAHB is urging the White House to hold a summit on lumber and building material supply chain issues and to temporarily ease 9% tariffs on Canadian lumber to beat back pricing volatility.
The group’s CEO Jerry Howard and senior staff have held discussions this year with White House staff from the Domestic Policy Council, National Economic Council and the Office of the Vice President on mill capacity issues, mill worker shortages, and the impact of lumber prices on the housing affordability crisis.
The affordability gap will probably be worse next year, Americans CoreLogic Public Policy Executive Pete Carroll said several weeks ago.
The gap, projected to reach 4.5 million units in 2022 from 2.5 million in 2018, will be of crisis proportions for the disadvantaged who earn less than half of what their neighbors do, asserts Carroll in a recent presentation.
“This particular gap is especially critical because the problem is twofold: in addition to there being an under-supply of new units for this income level, total household income is not keeping pace with the cost to operate and maintain these housing units,” he noted.