New home sales prices in September 2019 dropped to its lowest level in 3 years as of February 2016. The median sale price of new homes dropped to $299,440, -8.8% compared to one year ago, according to the US Census Bureau.
Fifty percent of all newly constructed homes were priced below $300,000 and the number of newly constructed homes priced below $200,000 doubled annually.
This price shift was due to the mix of homes selling within different price points, not to builders/developers making special deals or concessions with buyers.
The sales volume of newly constructed homes in September 2019 was down -0.7% compared with August 2019 BUT was +15.5% higher annually. Meanwhile the number of newly constructed high-priced homes was down however statistics for this specific data point were not given.
Robert Dietz, the chief economist with the National Association of Home Builders (NAHB), said, “The industry is experiencing a slow inventory mix shift to more affordable entry-level housing. It is still limited in terms of supply and we need more, but the shift has been occurring over the past 3+ years.”
Along with this inventory shift is a size shift. The median new home size in 2015 was 2,515 square feet. The median new home size in Q2 2019 was 2,245 square feet. Builders are constructing more townhouses. Why? Townhouses are cheaper to build, have lower price points and loud-and-clear demand is for more affordability.
Dietz said, “Hopefully, this (the building of more affordable townhouses) shows that builders are working to construct more affordable housing and that the median price will continue to drop.”
Robert Frank, the corporate economist with Navy Federal Credit Union, said, “Recent studies show that half of prospective homebuyers can’t afford a home about $300,000, so for the industry to engineer a strong revival, it must build more affordably priced houses.”
Ryan Marshall, the CEO of the Pulte Group, believes the housing market is almost completely dependent upon low mortgage rates. Marshall said, “Certainly, the market is strong, but affordability, I think, has got to continue to carry the day…we are teetering on the end of the lack of affordability.”
Thanks to Diana Olick of CNBC for source data