The median price for a new home posted a significant drop last month, but it’s not because builders are discounting their inventories or offering any special deals. Instead, the drop in prices was due to a greater mix of price points that builders are now selling.
The median price of a newly built home was $299,440 in September, down 8% compared to a year ago, census data shows. That is also the lowest median price reading since 2016. A year ago, the median price of a new home sold was $328,300.
Half of the new homes sold in September were priced below $300,000. A year ago, that percentage stood at 43%. Further, the number of new-homes sold under $200,000 doubled annually in September.
Many builders actually are still increasing their prices and dropping incentives as buyer demand grows, CNBC reports. But builders are adding in more entry-level homes to their offerings that has helped to bring the median sales price down. For years, builders have mostly catered to the luxury and move-up markets at higher price points as they’ve faced rising material costs and labor shortages.
“The industry is experiencing a slow inventory mix shift to more affordable entry-level housing,” says Robert Dietz, chief economist at the National Association of Home Builders. “It is still limited in terms of supply, and we need more, but the shift has been occurring over the last three-plus years.”
Notably, builders are adding more townhomes, which tend to come at lower price points.
“Hopefully this shows that builders are working to construct more affordable housing, and that the median price will continue to drop,” Robert Frick, corporate economist at Navy Federal Credit Union, told CNBC. “Recent studies show half of prospective homebuyers can’t afford a home above $300,000, so for the industry to engineer a strong revival it must build more affordably priced houses.”
Census data showed Thursday that sales of newly built homes did ease somewhat last month. Sales of new homes in September decreased slightly by 0.7% to a seasonally adjusted annual rate of 701,000 units. However, sales still remain 15.5% higher than a year ago, according to the census data.
Source: National Association of Home Builders and “September New Home Price Drops to Lowest in Nearly 3 Years, But Not Because Builders Are Offering Bargains,” CNBC (Oct. 24, 2019)
