Menu

The “MAGIC NUMBER” that is BLOCKING YOUR BUYERS

A certain “magic number” is making it increasingly hard for homebuyers to purchase properties these days, and if something doesn’t change, builders say that they simply will not be able to build any more homes for this tier of homeowners. The issue, according to the National Association of Home Builders (NAHB) is that median sales price of a new single-family home in 2015 was just under $300,000, and most first-time homebuyers need to purchase homes in the far more affordable sub-$150,000 range. The result: fewer than six percent of new homes on the market are priced below $150,000 and even fewer are priced under $100,000, despite the fact that nearly one in three potential buyers says that the only way that they can buy is if they pay less than $150,000.

Of course, that does not factor in the existing-home market, which one might think would have more affordable properties. In some areas of the country, this is the case. However, in high-demand areas where affordable, existing housing is simply largely nonexistent, this huge new-home stumbling block has effectively removed a large portion of the buying population from the equation.

Interestingly, the NAHB blames the government in large part for the affordability crunch. Nearly a quarter of the cost of a new home (average $84,000) can be accounted for by virtue of government fees and regulations. “Cost factors like these leave little mystery about why the lower 30 percent of the home-buying public is often restricted,” the NAHB noted in a recent press release.

Lesson Learned:

If you want to sell to first-time buyers, figure out a way to get below that problematic $150,000 number!

Point to Ponder:

Do you think it is worth it to sell to first-time buyers when second- and third-time purchasers usually can spend more money?

Thank you for reading REI Today!

Your comments and questions are welcomed below.

About the Author

Carole Ellis is the host of Real Estate Investing Today, a popular 9-minute daily podcast focused on educating real estate investors about the important topics that will make their investing SAFER, FASTER, and MORE PROFITABLE. She's also the editor of the Bryan Ellis Investing Letter. She has more than a decade's worth of experience in and reporting on the real estate industry and, additionally, has written dozens of courses on the topic. Carole lives in Kennesaw with her husband, Bryan, and four children. She believes wholeheartedly that your best investment is always your OWN education.

Leave a Comment:

Leave a Comment: