Big Gap Between Home Prices and Buyers' Expectations

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New data released by the U.S. Census Bureau and the Department of Housing and Urban Development, combined with recent NAHB survey data, show a mismatch between the actual prices of new homes and the prices buyers expect to pay — providing further evidence of a growing housing affordability problem. NAHB tabulation of the government data reveals that the median sales price of new single-family in 2018 was under $322,000. Nearly three quarters of them (73%) were priced between $250,000 and $1 million. Just 3% were less than $150,000, and none were under $100,000. In contrast, the 2019 edition NAHB’s What Home Buyers Really Want (based on a 2018 survey of approximately 4,000 recent and prospective buyers) showed that the median price buyers expect to pay is about $254,000. Fewer than half expect to pay $250,000 to $1 million.  Just over one-quarter (27%) are looking to pay less than $150,000, and 12% want to pay less than $100,000. Further analysis by NAHB senior economist Paul Emrath in this Eye on Housing blog post indicates that factors such as the ongoing shortages of labor and lots, along with escalating regulatory costs, have made it difficult to impossible to produce a new home at these lower price ranges. This is forcing a significant share of buyers into the market for existing homes only.  However, the market for existing homes has been very tight recently.  The months' supply of existing homes reported by the National Association of Realtors has been consistently under 4.5 for over two years.

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