Builders have been constructing more high-cost homes, reports MarketWatch reporter Jacob Passy. The inventory of homes listed above $350,000 increased 5.7% year-over-year, while the inventory of homes being sold for less than $200,000 has dropped 15.6%.
This is likely a result of the increase in building material and labor costs. Passy explains:
Higher costs of labor and materials and a low number of available lots have constrained homebuilding in recent years, said Danielle Hale, chief economist at Realtor.com. But in places like San Jose, where there’s greater demand for high-priced homes, builders are now finding more flexibility. “Builders can more easily pass on some of the increased costs they’re facing through high-end construction,” Hale said.
In other words, home builders will have to pay a higher price for things like lumber and construction workers regardless of the property they construct. Consequently, they’re more attracted to building trade-up homes or homes in pricier markets, since that will offset these added expenses, Hale said.
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