It’s getting more and more difficult to find an affordable new home.
Only 14% of new construction home sales last month had price tags under $300,000, according to data released Tuesday by the U.S. Census Bureau.
For the sake of comparison, in March of 2021, 34% of new home sales went for less than $300,000. The picture was even bleaker at the $200,000 threshold: just 1% of new homes sold in March 2022 went for less than that, compared to 2% the year before.
“Buyers are facing sticker shock due to deteriorating affordability conditions and a lack of existing home inventory,” Danushka Nanayakkara-Skillington, National Association of Home Builders (NAHB) Assistant Vice President of Forecasting and Analysis, said in a news release.
The median price of a new home sold in March was $436,700, the data shows. That’s a 21.4% jump from the median sale price of $359,600 in March 2021.
NAHB Chairman Jerry Konter said higher prices for new homes are the result of mortgage rates, which are now soaring above 5%, as well as the rising construction and development costs that builders are facing. When new homes are less affordable, sales slow down. The number of new home sales last month was 12.6% lower than the previous year, according to the Census Bureau.
Of course, it’s not just new construction that’s getting more expensive. In March, the median sale price for an existing home was $373,300, according to data from the National Association of Realtors. That’s a 15% jump from a year earlier.
Why are houses so expensive?
A surge of demand for homes during the pandemic combined with a severe shortage of inventory has driven home prices up some 20% over the past year alone, and prices are expected to climb even further in 2022. Rising mortgage rates have only intensified the crunch, and homes have become unaffordable for a growing portion of Americans.
But even though the market is still running significantly hotter than it did before the pandemic, there are some signs that the rapid price growth is beginning to slow. Data released Monday by real estate brokerage Redfin shows that competitiveness is declining for the first time since September as rising rates and prices push some buyers out of the market.
“That should provide some relief for people who can still afford to buy,” Redfin Chief Economist Daryl Fairweather said in a blog post, “as they’ll likely face fewer competing offers and may no longer need to offer drastically over the asking price in order to win.”