New construction homes are becoming more popular for Millennial homebuyers, even as housing prices stay high. (iStock)
As the housing market continues to ebb and flow, new construction homes have become the norm for at least one generation: Millennials.
The 2023 Consumer Housing Trends Report (CHTR), released by Zillow, shows that Millennials are the most likely generation to opt for new builds over older homes. It showed 41% of buyers who choose newly built homes are Millennials.
These Millennials and other new build buyers often have higher incomes, understandable considering the average cost of a new construction home was $308,348 in 2022, according to Home Advisor. The Zillow study explains that new construction buyers make about $118,054 on average each year, while the average income for existing home buyers is $96,375.
The reason new homes are coming back into style has to do with a desire to avoid costly home repairs, the study says. Two out of five (43%) survey respondents said they wanted their new home to be fully move-in ready.
Avoiding fixer-uppers can help you save in the long run, but getting the lowest mortgage rate upfront is the best way to save on your overall home costs. Visit Credible to find the best mortgage rate for your financial situation and prequalify within minutes.
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Houses are getting more expensive
While new construction homes are popular, they’re not always easy to come by. Buying a home is growing increasingly expensive as prices are up 3.7% since last year, according to Redfin’s latest report. Currently, the average home price across the country is just under $413,000, Redfin reports.
With the average median income sitting at $70,784 according to Zillow’s study, more than $400,000 homes are not a possibility for most. A particularly difficult reality to deal with as rental prices skyrocket and apartment availability becomes more limited.
High incomes are necessary to purchase in many areas across the country, according to the Harvard Joint Center for Housing Studies. Areas like Southern Florida, California and parts of Washington require an income of at least $150,000 to afford a home.
The income required along with the low inventory leaves many buyers without homebuying options. The National Association of Realtors’ housing shortage tracker shows what areas in the country are facing the biggest shortage. Today, Southern California, Hawaii, Washington and Southern Florida all have high housing shortages. But the market doesn’t look as dreary in other areas of the country where the market is more favorable, giving buyers some hope.
“Home prices are cooling down faster than normal as new listings from existing owners and total inventory slowly recover,” Zillow Chief Economist Skylar Olsen said in a recent press release.
As the market moves towards recovery, certain borrowers may qualify more easily for mortgages. If you’re looking to purchase a home in today’s market, explore your mortgage options by visiting Credible. You can compare rates and lenders and get a mortgage preapproval letter in minutes.
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State and local governments address high housing costs
The housing crisis has not gone unnoticed by various federal and state government officials. On a federal level, the U.S. Department of Housing and Urban Development (HUD) released an initiative back in July to help combat the housing crisis. The $85 million PRO Housing program offers grants to states and local governments willing to provide more affordable housing to residents.
In 2023, some states have adjusted housing regulations to make housing easier to provide or cheaper to build. Washington recently passed Bill 1110 which creates “middle housing” like duplexes and multifamily houses in areas traditionally home to single-family dwellings. This increases the availability of housing on the market.
California is still in the process of getting AB 309 passed, an act that would create the Social Housing Program. This program would pave the way for the creation of housing developments on state property. It lays out two models, one creating more rentable units and the other focusing on homeownership. The bill also expressly prohibits cities from denying these social housing developments that fall under the structure of the program.
Rhode Island’s House Speaker K. Joseph Shekarchi introduced a large legislation package focused on addressing the housing crisis in the state. The bills have all recently passed.
“This budget cycle and legislative session was a major step in the right direction for Rhode Island in terms of creating more affordable accessible housing for all,” Rhode Island Governor Daniel McKee said.
If you’re considering buying, a site like Credible can help you view multiple mortgage lenders and provide you a personalized rate in minutes, all without impacting your credit score.
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