Cost of housing in US is rising fastly and it is more apparent than in real estate market for newly built homes. Sales of homes are rising but in higher end this is leaving majority of the entry level of buyers out of the luck and out of the homeownership because there are few existing and cheaper homes for sale. Whereas homebuilders claim that they are trying to target highest demand from the entry level buyers.
According to John Burns, California-based Real Estate Consulting Agency more of the affordable homes are priced under $200,000 which are made up of market in 2010. They are 16% of new for sales construction. During same period, share of newly built prices homes between $200,000 and $400,000 has now grown to 55% from 43%. Going further price scale, share of newly built prices above $400,000 has doubled to 29% of market from 13%.
According to U.S. Census, sale of newly built homes stand by 9% higher than a year ago that they remain well according to historical norms does construction of single family homes. David Jarvis, a Senior Vice President, John Burns Real Estate noted that more than half of the non home owning adult cites need flexibility as main reason which they don’t own. Even low mortgage rates affordability has become big problem.
According to survey done by National Association of Home Builders, affordability of housing fell in second quarter of this year. Only 59% above for both existing and new homes which were sold between beginning of April and end of the June were considered affordable for families who were earning median income of $68,000. It is down from 62% in same quarter of year 2016 and marked lowest level since second half of year 2008. Before boom in last real estate market and bust around 69% of the homes which were considered affordable.
Peter Boockvar, a Chief Market Analyst, The Lindsey Group noted that the evidences has grown and buyers are becoming more sensitive to persistent of price gains of 5-6% that put median home price at high record. It is great for sellers which is more challenging for the buyers who have come up with down payment on rising prices of homes. Low rates of mortgages and 3% down payment deal helps but issue of pricing of homes help to explain historically low rate of homeownership.
Builders like Lennar, LGI Homes and D.R. Horton offer low-priced products but big majority of builders are concentrating on move-up market. As this may offer cheaper homes as they say that condition of current market doesn’t allow this.
Granger MacDonald, a Chairman of National Association of Homebuilders and developer from Kerrville, Texas said that rising prices in material along with lots of shortages of buildable material and skilled labor also this putting pressure on prices of homes and impeding recovery of robust housing.