First-Time Buyers Find Fewer New Homes to Choose From
First-Time Buyers Find Fewer New Homes to Choose From
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There’s more bad news out there for first-time buyers—that is, besides the rising home prices, lack of properties on the market, and bidding wars.
Sales of cheaper newly constructed homes, which buyers have been clamoring for, dropped in September, according to the U.S. Commerce Department’s new residential sales report. In fact, just 2% of all new home sales were under $150,000 last month—down from 5% of sales the previous month and 5% from the same time a year ago.
The sales numbers are an indication that builders are erecting only a very limited number of starter homes.
“Having starter home options for new buyers is really important,” says Danielle Hale, managing director of housing research at the National Association of Realtors®. “[But] we do find the majority of first-time buyers tend to buy existing homes, because there aren’t many new homes on the market in the starter home price range.”
Meanwhile, about 12% of never-been-lived-in-before homes between $150,000 and $199,999 were sold last month. That’s a dip from 13% of new home sales both in August and the same month the previous year.
Realtor.com® looked only at the numbers that were not seasonally adjusted. This means that they weren’t smoothed out over a 12-month period to account for seasonal fluctuations.
The majority of new home sales, 57%, were in the $200,000 to $399,999 range, according to the report.
The median price of a new home was $313,500 in September, according to the report. That’s nearly 33.9% higher than the median price of an existing home, at $234,200 in September, according to data from the National Association of Realtors.
That’s because it’s more cost-effective for builders to put up more expensive abodes to cover the high costs of land, materials, and labor. Regulatory and financing hurdles may also push up the final price tag.
“The new homes tend to be a little bit larger,” Hale says. “There tend to be different features in new homes, modern updates, and upgrades that you wouldn’t find in existing homes.”
Throughout the country, about 46,000 new homes were sold last month—up a whopping 31.4% from September of 2016. But it also represented a 2.1% dip from August. That’s normal, as summer is the busiest season for home buying, which begins to taper off in the fall as children go back to school.
The majority of sales, about 26,000, were in the South, according to the report. That’s up 30% from September of 2015. The region has been seeing an influx of new companies and people due to the warmer weather, lower taxes, and affordable cost of living.
Next up was the West, with about 11,000 new home sales, representing a 37.5% bump from the same month a year ago.
It was followed by the Midwest, at 6,000 sales, and the Northeast, with 3,000 sales. New home sales were up annually in those regions by 20% and 50%, respectively.
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