Escalating Building Costs Pose Pricing Problem

DAILY REAL ESTATE NEWS | FRIDAY, JUNE 10, 2016

Builders are finding it increasingly difficult to build a home for under $150,000, despite the rising consumer demand for more affordable home options.

The median sales price of a new single-family homes in 2015 was just under $300,000, according to the National Association of Home Builders. About 78 percent of new homes were priced between $150,000 and $500,000. But a closer look at the data shows that less than 6 percent were priced under $150,000 and an even smaller share under $100,000.

Read more: If They Don't Build Homes, You Can't Sell Them

Yet, a 2015 Home Buyer Preference Survey conducted by NAHB shows that 31 percent of recent or prospective home shoppers say they expect to pay less than $150,000 for a home. Fifteen percent expect to pay under $100,000.

“The costs of acquiring land, developing it into a lot, and construction a home on it often make it impossible to produce a new home at a price substantially below $150,000,” NAHB notes on its blog, Eye on Housing.

Government regulation on a new home alone accounts for 24.3 percent of the price of the home – or about $84,000 based on the average new-home price.

“Cost factors like these leave little mystery about why the lower 30 percent of the home buying public is often restricted to the market for existing homes,” NAHB notes.

Source: “New House Price Data Shows Why Costs Are a Problem,” National Association of Home Builders’ Eye on Housing blog (June 6, 2016)