Production Is Solid, But New Homes Are Still Too Expensive For Many Buyers

May 25, 2017

Builders are targeting Millennials by constructing lower-priced homes and stripped-down models. But, potential buyers are still balking at the prices.

CNBC reports that the supply of newly built homes has jumped and reached the 30-year average. But, sales for new homes priced below $300,000 remain flat.

The issue is that much of the demand is driven by young buyers with limited cash and credit. Builders, though, are hamstrung by regulatory issues and high costs of land, labor, and materials, and cannot lower prices too dramatically without impacting their margins.

"Some of the regulatory issues that have been put in by state and local governments, some of the capital constraints that the independent builders are facing, the labor shortages in a lot of markets, have all conspired to make this a very difficult recovery for new-home builders," said Rick Sharga, chief marketing officer at Ten-X, a real estate auction company.

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