Median prices for newly built homes dropped significantly last month, but not because builders are offering any special discounts or deals. Rather, the drop came due to a greater mix of price points builders are now selling at, CNBC reported.
The median price of a new home was $299,400 in September, down 8% from the same month one year ago. It’s also the lowest median price for new homes since 2016. One year earlier, the median price for a new home stood at $328.300.
But half of all new homes sold in September came in below $300,000. One year ago, just 43% of new homes were priced that cheaply. Also, the number of new homes sold costing less than $200,000 doubled compared to one year ago.
CNBC notes that most builders are still raising prices and reducing incentives amid strong demand from buyers, but at the same time they’re also building more entry-level homes. As a result, median prices are falling as there are more cheaper options besides pricier ones. It marks a shift from the days when builders primarily catered to the move-up and luxury markets, and is partly due to rising material costs and shortages of labor.
“The industry is experiencing a slow inventory mix shift to more affordable entry-level housing,” said Robert Dietz, chief economist at the National Association of Home Builders. “It is still limited in terms of supply, and we need more, but the shift has been occurring over the last three-plus years.”
There has been a significant increase in the number of new townhomes, which are generally cheaper than traditional homes.
“Hopefully this shows that builders are working to construct more affordable housing, and that the median price will continue to drop,” Robert Frick, corporate economist at Navy Federal Credit Union, told CNBC. “Recent studies show half of prospective homebuyers can’t afford a home above $300,000, so for the industry to engineer a strong revival it must build more affordably priced houses.”
Census data showed Thursday that sales of newly built homes did ease somewhat last month. Sales of new homes in September decreased slightly by 0.7% to a seasonally adjusted annual rate of 701,000 units. However, sales still remain 15.5% higher than a year ago, according to the census data.