People Want Less Expensive Homes – And Builders Are Responding

<article class="post-776724 post type-post status-publish format-standard has-post-thumbnail hentry" id="post-776724"><span class="entry-date">August 17, 2023</span><div class="entry-header center-block text-center"><h1 class="entry-title">People Want Less Expensive Homes – And Builders Are Responding</h1><div class="shareBlock"><div class="shareTitle">Share</div><div class="shareIcons"><a aria-label="Twitter Share Link" class="twitter solid display-inline-block" data-tracking="Post,Social Post Link Clicked,Twitter" href="http://twitter.com/share?text=People+Want+Less+Expensive+Homes+%E2%80%93+And+Builders+Are+Responding&amp;url=https%3A%2F%2Fgilliggroup.com%2Fblog%2Fpeople-want-less-expensive-homes-and-builders-are-responding%2F" target="_blank"><span class="force-hidden">Twitter</span></a>
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</div></div><div class="post-tax post-category"><span></span><a href="../category/realtor-blog/index.html" rel="tag">Realtor Blog</a></div><div class="post-tax post-post_tag"></div></div><div class="entry-content"><div><img alt="People Want Less Expensive Homes – And Builders Are Responding Simplifying The Market" decoding="async" loading="lazy" src="https://media.agentaprd.com/sites/222/20230817-People-want-less-expensive-homes-and-builders-are-responding.webp" style="display: block; margin-bottom: 5px; clear: both; max-width: 100%;" width="358"/>
<p>In today’s housing market, there are two main affordability challenges impacting buyers: <a href="https://www.simplifyingthemarket.com/2023/08/03/how-inflation-affects-mortgage-rates/?a=712984-fa409495d5d70154d03a25e81e9540e2" rel="noopener noreferrer" target="_blank">mortgage rates</a> that are <a href="https://www.simplifyingthemarket.com/2023/07/19/explaining-todays-mortgage-rates/?a=712984-fa409495d5d70154d03a25e81e9540e2" rel="noopener noreferrer" target="_blank">higher</a> than they’ve been the past couple of <a href="https://www.freddiemac.com/pmms/archive" rel="noopener noreferrer" target="_blank">years</a>, and rising home prices caused by <a href="https://www.simplifyingthemarket.com/2023/08/08/theres-only-half-the-inventory-of-a-normal-housing-market-today/?a=712984-fa409495d5d70154d03a25e81e9540e2" rel="noopener noreferrer" target="_blank">low inventory</a>. To overcome those challenges, many people are working with their agents to find less expensive homes. And with newly built homes making up a historically large <a href="https://www.simplifyingthemarket.com/2023/06/29/where-will-you-go-if-you-sell-newly-built-homes-might-be-the-answer/?a=712984-fa409495d5d70154d03a25e81e9540e2" rel="noopener noreferrer" target="_blank">percentage</a> of the total available inventory today, that search often includes brand new homes.</p>
<h4><strong>People Are Spending Less on Newly Built Homes</strong></h4>
<p>The graph below uses the latest information from the <a href="https://www.census.gov/construction/nrs/index.html" rel="noopener noreferrer" target="_blank"><em>Census</em></a> to show, in June, more of the newly built home sales in this country were in lower price ranges than in 2022:<a href="https://www.simplifyingthemarket.com/content/images/20230816/20230817-Newly-built-home-sales-by-price-segment.png?a=712984-fa409495d5d70154d03a25e81e9540e2" rel="noopener noreferrer" target="_blank"><img decoding="async" src="https://files.keepingcurrentmatters.com/content/images/20230816/20230817-Newly-built-home-sales-by-price-segment.png"/></a>Last year, only 58% of newly built home sales were less than $500,000. This June, that number was up to 65%. <strong>This means more people are buying less expensive newly built homes right now while affordability remains a challenge. </strong></p>
<h4><strong>Builders Are Offering Lower-Cost Options</strong></h4>
<p>Builders have picked up on this trend and are reacting accordingly. George Ratiu, Chief Economist at <em>Keeping Current Matters</em>, <a href="https://twitter.com/KCMcrew/status/1684206839523684355" rel="noopener noreferrer" target="_blank">explains</a>:</p>
<blockquote><p><em>“Builders are also responding to this shift by bringing slightly smaller homes to market in an effort to meet lower price points . . .”</em></p></blockquote>
<p>New <a href="https://www.census.gov/construction/nrs/index.html" rel="noopener noreferrer" target="_blank">data</a> from the <em>Census</em> further confirms this pattern – it shows the median sales price of newly built homes has dipped down in recent months (<em>see graph below</em>):<a href="https://www.simplifyingthemarket.com/content/images/20230816/20230817-Newly-built-home-prices-reflect-smaller-homes.png?a=712984-fa409495d5d70154d03a25e81e9540e2" rel="noopener noreferrer" target="_blank"><img decoding="async" src="https://files.keepingcurrentmatters.com/content/images/20230816/20230817-Newly-built-home-prices-reflect-smaller-homes.png"/></a>And as Mikaela Arroyo, Director of the <em>New Home Trends Institute </em>at<em> John Burns Real Estate Consulting</em>, <a href="https://www.marketwatch.com/story/the-shrinking-american-home-as-demand-rises-builders-go-smaller-ed2a327c?siteid=msnheadlines" rel="noopener noreferrer" target="_blank">says</a>, the builders who are most responsive to this trend are forming pathways to homeownership:</p>
<blockquote><p> <em>“. . . </em><strong><em>it is creating opportunities for people to be able to afford an entry-level home in an area</em></strong><em>. . . . if you get that size down, that automatically will make it a more affordable home. The [builders] that are decreasing [size] the most are probably the ones that try to build more of an affordable product.”</em></p></blockquote>
<h4> <strong>How an Agent Can Help</strong></h4>
<p> Builders producing smaller, less expensive newly built homes give you more affordable options at a time when that’s really needed. If you’re hoping to buy a home soon, partner with a local real estate agent to find out what’s available in your area. An agent can help you look at newly built homes or ones under construction nearby. </p>
<h3>Bottom Line</h3>
<p>If you’re having a hard time finding a home you like in your budget, connect with a real estate professional. You need <a href="https://www.simplifyingthemarket.com/2023/08/09/the-value-of-an-agent-when-buying-your-new-construction-home/" rel="noopener noreferrer" target="_blank">an agent</a> who knows all about the latest inventory in your area, including homes still under construction or just built. That way you have an expert on your side who can provide information on builder reputations, builder contracts and negotiations, and more to help you with the homebuying process.</p>
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