The Main Reason People Are Not Buying Homes Is Affordability

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The Editors's picture
Affordability of new homes main reason people choose to rent

A majority of people say new home affordability is the main reason they do not own a home, and not a desire to have the flexibility of renting, according to new research from John Burns Real Estate Consulting.

The trend of more people choosing to rent may be tied directly to the fact that new homes now are simply too expensive and unaffordable for consumers. Plus, builders have moved away from building new homes under $200,000 and focused on much higher priced new homes, according to the report.

“Rising new home prices across the nation have eroded new home sales under $200,000 and contributed to lackluster new home sales volumes,” write David Jarvis, John Burns Senior Vice President, and Matt Farris, Associate.

Affordability - cost of new homes - is bigger issue than desire to rent

More than half (55%) of non-home owning adults cite affordability as the main reason they do not currently own a home, compared to only 22% who cite the need for flexibility as the main reason they do not own.

 Even with historically low mortgage rates, affordability has become a huge problem.

Homes under $200,000 used to be 44% percent of the market – now only 16%

”New homes priced under $200,000 comprised nearly half of the market (44%) in 2010, compared to only 16% of the market today,” Jarvis and Farris write in an article for John Burns Real Estate Consulting.

“During the same period, the share of new homes priced from $200,000 to $400,000 has grown from 43% to 55%, and the share of new homes priced above $400,000 has risen from 13% of the market to 29%.”

Nationally strong demand for entry-level homes

Affordability is main reason people are renting rather than buying new homes

“Nationally, there is strong unmet demand for new, entry-level, affordable homes,” writes Jarvis.

“I recently experienced this in Houston, where Matt Farris, Dustin Moudy, and I live and consult for our team. Despite new home prices rising a whopping 40% between 2011 and 2015 and oil prices subsequently plummeting, home builders who focus on sub-$300,000 new homes (such as LGI Homes, K. Hovnanian Homes, Centex Homes [by Pulte], and Long Lake LTD.) continued to sell well and gained significant market share.

Throughout the period of falling oil prices, demand for new homes priced under $300,000 has remained strong.

If you have any questions please contact David at (713) 906-3829  or by email here.

About John Burns Real Estate Consulting

John Burns Real Estate Consulting, LLC provides independent research and consulting services related to the US housing industry. John Burns founded the company in 2001 because he saw a need for better analysis on the housing market. The company has grown to a highly passionate team of research analysts and consultants in offices across the country, who work together to provide the most trusted source of US housing analysis.

About David Jarvis

David has more than 25 years of real estate and home building experience in a variety of concentrations including land acquisition and development, land planning, home building, commercial real estate and residential sales. Prior to joining John Burns Real Estate Consulting, David Jarvis worked as Executive Vice President of McAlister Investment Real Estate, a real estate investment firm focused principally on undeveloped land parcels in the metropolitan markets of Texas and the Sun Belt states. David managed McAlister Investment Real Estate acquisitions, coordinates deal structure, and conducted market research. David served as Houston Director for an information technology company where he directed their Houston Advisory service and Consulting Services for the state of Texas.  Additionally, he is a Licensed Broker in the State of Texas. David holds both the CCIM and MIRM education designations. David received his Bachelor of Arts in Marketing from the DePaul University.

About Matt Farris

Matt supports consulting services by compiling and analyzing market data, conducting field research, and creating reports for market and project feasibility studies. Matt has a B.B.A. in Economics from Sam Houston State University and received an M.A. in Applied Economics from the University of Houston. He is based in our Houston office.

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