Rising prices in new-home construction have mostly shut out buyers in the lower end of the market, shows a new analysis from the National Association of Home Builders. Buyers in the bottom one-fourth of the market have had to look exclusively at the stock of existing homes. However, fast-rising prices in the existing-home market may soon price out buyers as well.
The median price of a newly built single-family home that was started in 2020 was $336,000. About 79% of those homes were priced between $250,000 to $1 million. Almost none were priced under $150,000, according to NAHB’s analysis.
However, the median price home shoppers expect to pay for a new home is about $265,000, according to NAHB’s What Home Buyers Really Want survey of more than 3,000 recent and prospective home buyers. About one-fourth of survey respondents are looking to pay less than $150,000. In 2020, new construction was providing essentially no product for the bottom one-fourth of the home buying market, the NAHB acknowledges on its Eye on Housing blog.
Prices are rising even more in 2021. The median price of a new home in May climbed 18% year over year to $374,400. The median price for an existing home in May was $350,300, a nearly 24% increase from a year earlier. Construction costs are rising and buyer demand is skyrocketing, leading to higher home prices in the new-home market.