Low inventory and rising costs are contributing to a steady decline in interest for new construction, according to the latest Housing Trends Report from the National Association of Home Builders (NAHB).
By the 4th quarter of 2020 (after the start of the pandemic) 42% of buyers were looking to purchase a newly-built home. That marked a sharp increase from the first quarter of 2018 when only 15% indicated they were looking for new construction. With double-digit gains in new home prices, interest declined for four straight quarters, dropping to 25% in Q421. Those who were ambivalent between new or existing jumped from 27% in Q420 to 39% in Q421.
A comparison by region shows the share of buyers who would prefer a newly-built home declined in every region from Q321 to Q421.
Among generations, the share of Millennial and Gen X buyers who prefer a new home was nearly halved, dropping from 50% to 28% for Millennials and from 48% to 24% for Gen X shoppers.
Asked about their availability expectations, only 16% of home buyers in Q118 expected that finding a home would be easier in the months ahead. In the early phase of the pandemic it soared to 36% (Q420), but then declined throughout 2021. By Q421, on 24% thought finding a home would be easier in the forthcoming months.
Buyers’ affordability expectations also worsened throughout 2021. By Q421, after rising all year, the share of buyers who said they could afford less than half the homes in their markets reached 76%, up from the year earlier figure of 63%.
Rising home prices are discouraging a growing share of prospective buyers from engaging in the purchase process. Until Q221, the share of potential buyers actively trying to find a home grew steadily for six straight quarters, peaking at 61%. It fell to 57% in Q321 and dropped again in Q421, to 52%. All regions reported declines, with the largest plunge occurring in the South, where it fell from 51% to 42%.
The survey also showed active buyers are spending longer periods of time searching. In Q118, slightly more than half (52%) had spent 3+ months house hunting; by Q421, it grew to two-thirds (67%).
When buyers who had searched for 3+ months were asked to cite reasons why they had not been successful, the inability to find an affordably-priced home was the most common reason, listed by 41% of would-be buyers. That was followed by an inability to find a home with desirable features (39%). Nearly as many (35%) said their lack of success was because other buyers outbid them.
The Housing Trends Report is based on research conducted for NAHB by Morning Consult, a global firm that surveys an estimated 6,000 U.S. consumers every day. The builder association measures prospective home buyers’ perceptions about the availability and affordability of homes for-sale in their markets every quarter.