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%).
Related Stories
Builders
Homebuilders Keep a Steady Pace as the Market Cools
As mortgage rates quell heated competition and elevated buyer demand for existing homes, builders are finding ways to offer affordability to a more budget-conscious consumer base
Environmental
Builders Race to Future-Proof New Residential Development Against Climate Change
New residential projects are employing resilient building techniques to withstand the intensifying effects of climate change in the decades to come
New-Construction Projects
Housing Completions Expected to Boost Supply in 2022
The housing market may be slowing down, but new construction projects are keeping a steady pace, experts say
