The percentage of sales for homes priced below $300,000 is increasing, indicating a possible shift in the construction of smaller homes to attract first-time homebuyers. In April, 17 percent of new homes sold were priced below $300,000, compared to 14 percent a year ago. At the same time, the percentage of homes sold between $300,000 and $399,999 decreased, reflecting a change in market dynamics. Builders are moving towards constructing smaller properties to entice Americans into homeownership, and more affordable designs are being offered to address housing affordability concerns.
Builders are struggling to attract buyers despite offering smaller and more affordable homes. In April, new home sales fell by nearly 5 percent from the prior month and were down close to 8 percent compared to the previous year. The median sales price remains elevated at $433,500, albeit slightly lower than the previous month. The National Association of Home Builders (NAHB) noted that over one-third of builders reduced home prices in 2023, and they are expected to continue offering smaller homes to improve affordability. The housing market is facing challenges related to high mortgage rates and expensive properties.
Realtor.com’s chief economist, Danielle Hale, highlighted the growing share of homes sold in the under $300,000 category, indicating increased sales in more affordable price points. She observed a decline in sales in the middle-tier price range of $300,000 to $399,999, suggesting a shift towards smaller homes to offer more affordable options. Builders are adjusting their tactics to address the lack of affordability in the market, likely by constructing smaller homes to meet demand for lower-priced properties. The changing market dynamics are reflected in the shifting sales patterns seen in the housing sector.
While new home sales in April fell short of expectations, there is optimism for improvement in the coming months. Mortgage rates, which had exceeded 7 percent, are now trending downwards, potentially encouraging buyers to enter the market. Freddie Mac reported that the 30-year fixed mortgage rate fell below 7 percent for the first time in weeks, providing a positive outlook for the housing market. Greater supply and lower interest rates could boost sales in the upcoming months, offering hope for an uptick in new home sales. Overall, there is anticipation for improved market conditions moving forward.
