Fewer Buyers Are Looking for New Construction as Prices for Building Materials Rise
Homebuyers backed by low mortgage rates set their standards high and searched predominantly for newly constructed homes in 2020, but just two years later, rising prices for building materials and elevated home prices are chipping away at mid-pandemic preferences. After falling for five straight quarters, the share of prospective buyers searching for new construction is back to pre-pandemic levels at just 19%, a significant drop from 42% of house hunters in 2020, NAHB Eye on Housing reports.
A 31% increase in the cost of building materials is pushing new construction further out of buyers’ budgets, particularly as rising inflation for everyday commodities threatens affordability on nearly every front.
By the fourth quarter of 2020, 42% of prospective buyers preferred new construction. Since then, however, rising new home prices (driven by a 31% increase in the cost of building materials) have eroded the preference for new homes.
New construction has lost preference in every region of the country. From peak to now, the share of buyers who’d prefer a newly-built home dropped in the Northeast (60% to 19%), Midwest (27% to 14%), South (33% to 21%), and West (51% to 24%).