Very nearly three out of five people surveyed by the National Association of Home Builders expects to pay $249,000 or less for the privilege of owning a new home. One in six actually thinks that $100,000 or less is their cap on a new home, and a full 31% believes that $150,000 is their limit.
That group of people--59% of the would-be new-home buyers in the sample--defines, in frustrating precision, the size of the marketplace home builders are finding it so difficult to activate, even as the rarefied, higher-end market place that has been a bright spot starts to dim and slow down.
Here, from NAHB economist Paul Emrath, is a look at the "mismatch" between what NAHB survey respondents say they can and would spend on a new home and what is actually being completed and sold, per data from the U.S. Census Characteristics of New Housing for 2015.
One can see here that, while 59% of respondents told the NAHB that $249,000 was their limit on a new home, 65% of the homes started in 2015 were over that limit. As Emrath notes, the "expects to pay" median came in at $219,000, a far cry from the median price of a single family start in 2015 of $298,000.
Emrath spotlights the challenges heaped on developers and builders who bring new home communities into the pipeline--labor capacity imbalances that impact costs; lot pipeline imbalances that impact costs; and local regulatory overreach that, guess what, impact costs.
All of this is material and real as far as challenges to home builders' business models. But what we come back to repeatedly is the realization that none of these challenges is likely to subside in and of itself, and yet--as we've seen in a few well-known exceptions to the rule that it's nearly impossible to bring sub-$150,000 new homes onto the market--the magnitude of those challenges measures the magnitude of opportunity to match where there's a mismatch.
Density, distance from work centers, operational and process excellence, design and engineering innovation, supply chain efficiency, strong relationships with off-market land providers, overhead management, and scalability, etc., are some of the antidotes for the labor, lots, and regulatory impediments builders face in today's markets.
Meanwhile, have fun with the Census's interactive New Single-Family Homes in 2015 feature, which compares features for the 648,000 homes completed, and 501,000 homes sold, ranging from fireplaces, to siding, to heating fuel, to outdoor decks, to total square footage for lot size, etc. You can find it here: