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New Home Sales Slow Despite Lower Prices

There’s a national housing crisis going on right under your nose, and this is pushing home prices downward quite quickly. Despite these low prices, home sales are slower than expected for a few reasons. Experts and economists agree – things may be moving toward a new trend.

A Slow but Steady Decline

A report provided by the US Department of Housing and Urban Development in conjunction with the US Census Bureau shows just how slow home sales have become. In April 2007, buyers purchased 569,000 new homes across the country. That’s an 11% decline from the month before. This number also accounts for an increase of just half a percent over April 2016’s numbers. There are several reasons for this, and economists seem to think a combination of factors led to the sharp decline in new home sales.

new home salesNew Home Sales and the Average Budget

Just as sales were down in April, so were overall home prices. The national average fell in April by about 3%, making the average home price $309,200 during that month and by nearly 4% from April of last year. Despite this, new homes simply aren’t fitting Americans’ budgets – especially if they’re first-time buyers. In fact, the average price of an existing home was just $237,800, which is 30% less than the cost of a new build. There just aren’t enough homes under the $200,000 price range available to moderate-income families.

The Impact on the Denver Area

The Western part of the country is seeing the biggest impact from significantly slower new home sales. Per the same survey, sales dipped just over 23% from March to April 2017, and they were down 13.7% over April 2016 numbers. This is much slower than other parts of the country during that same timeframe.

  • Northeast – Sales in the Northeast were down 7.5% from March to April, but were down only 5% from the previous year.
  • South – Sales in the south were up 4% annually, but down just 4% from the previous month.
  • Midwest – Month-to-month sales dropped 13% from March to April but were up overall from the previous year by 19.7%. This marked the most significant annual increase in new home sales in the country.

Will There be More Affordable Homes?

Builders seem to be constructing more luxury homes and higher-end homes in the $200,000 to $299,000 range because those are the homes that sell. What’s more, increasing labor, land, and material costs make it difficult for builders to create homes spacious enough for the average American family for less than $200,000. It’s far cheaper for Americans with low to moderate incomes to purchase existing homes, and that’s the route many people are taking. Builders aren’t likely to focus on building new homes for these budgets except for in places like the Midwest, where it seems that more people are moving toward the new home trend.

While there’s no shortage of homes for people who are considered upper-middle class and have above average incomes, the number of new builds being constructed for low to middle class incomes has slowed significantly. New home sales are on the decline everywhere for several reasons, and according to the economists, this may be the trend for many years to come.

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