Rising Demand for Affordable Homes Sparks Shift in New Construction Trends

In the current real estate landscape, buyers face two primary hurdles to affordability: elevated mortgage rates compared to recent years and escalating home prices due to limited inventory. To surmount these obstacles, numerous individuals are collaborating with their agents to locate more budget-friendly housing options. Given that newly constructed homes presently constitute a notably significant portion of the overall housing supply, this quest frequently encompasses newly built residences.

People Are Spending Less on Newly Built Homes

Utilizing the most recent data from the Census, the graph below illustrates that in June, a greater proportion of newly constructed home sales in the nation fell within lower price ranges compared to 2022:

In the preceding year, merely 58% of recently constructed home sales amounted to less than $500,000. However, during this June, that figure surged to 65%. This trend indicates an increased preference for more affordable newly built homes at present, despite persisting affordability concerns.

Builders Are Offering Lower-Cost Options

Builders have taken notice of this pattern and are responding in kind. George Ratiu, who serves as the Chief Economist at Keeping Current Matters, provides insight:

"Builders are adapting to this change by introducing slightly more compact homes to the market, aiming to align with reduced price ranges . . ."

Recent data from the Census reinforces this trend, indicating that the median sales price of newly constructed homes has experienced a decline in the past few months (depicted in the graph below):

According to Mikaela Arroyo, who holds the position of Director at John Burns Real Estate Consulting's New Home Trends Institute, builders that are particularly attuned to this trend are creating avenues toward homeownership:

". . . it is generating possibilities for individuals to access affordable entry-level homes within specific regions. . . . by reducing the dimensions, the home automatically becomes more budget-friendly. Those builders who are implementing the greatest size reductions are likely the ones striving to develop a more affordable product."

 How an Agent Can Help

Builders who create smaller, more affordable newly constructed homes provide increased affordability options, which is especially crucial now. If you're considering a home purchase in the near future, collaborate with a local real estate agent to explore the offerings in your vicinity. An agent can assist you in examining newly built homes or those currently being constructed nearby.

Bottom Line

Should you encounter challenges in locating a home that aligns with your budget and preferences, it's advisable to link up with a real estate expert. Engaging an agent well-versed in the current inventory within your locale, encompassing homes in various stages of construction, is crucial. By doing so, you gain the support of a knowledgeable professional who can furnish insights into builder credibility, contractual matters, negotiation strategies, and other essential aspects of the homebuying journey.