{"id":59860,"date":"2017-10-25T05:00:23","date_gmt":"2017-10-25T12:00:23","guid":{"rendered":"https:\/\/redfindevelop.wpengine.com\/blog\/?p=59860"},"modified":"2020-10-06T12:58:38","modified_gmt":"2020-10-06T19:58:38","slug":"heres-the-1-reason-its-so-hard-to-find-an-affordable-home","status":"publish","type":"post","link":"https:\/\/www.redfin.com\/news\/heres-the-1-reason-its-so-hard-to-find-an-affordable-home\/","title":{"rendered":"Here\u2019s the #1 Reason It\u2019s so Hard to Find an Affordable Home"},"content":{"rendered":"<div id=\"viz1508904329532\" class=\"tableauPlaceholder\" style=\"position: relative;\"><noscript><a href='https:&#47;&#47;redfindevelop.wpengine.com&#47;blog&#47;2017&#47;10&#47;heres-the-1-reason-its-so-hard-to-find-an-affordable-home.html'><img alt=' ' src='https:&#47;&#47;public.tableau.com&#47;static&#47;images&#47;Ne&#47;NewConstructionDataCenter&#47;MedianSalePrice&#47;1_rss.png' style='border: none' \/><\/a><\/noscript><object class=\"tableauViz\" style=\"display: none;\" width=\"300\" height=\"150\"><param name=\"host_url\" value=\"https%3A%2F%2Fpublic.tableau.com%2F\" \/><param name=\"embed_code_version\" value=\"3\" \/><param name=\"site_root\" value=\"\" \/><param name=\"name\" value=\"NewConstructionDataCenter\/MedianSalePrice\" \/><param name=\"tabs\" value=\"yes\" \/><param name=\"toolbar\" value=\"yes\" \/><param name=\"static_image\" value=\"https:\/\/public.tableau.com\/static\/images\/Ne\/NewConstructionDataCenter\/MedianSalePrice\/1.png\" \/><param name=\"animate_transition\" value=\"yes\" \/><param name=\"display_static_image\" value=\"yes\" \/><param name=\"display_spinner\" value=\"yes\" \/><param name=\"display_overlay\" value=\"yes\" \/><param name=\"display_count\" value=\"yes\" \/><\/object><\/div>\n<p><script type='text\/javascript'>                    var divElement = document.getElementById('viz1508904329532');                    var vizElement = divElement.getElementsByTagName('object')[0];                    vizElement.style.width='800px';vizElement.style.height='650px';                    var scriptElement = document.createElement('script');                    scriptElement.src = 'https:\/\/public.tableau.com\/javascripts\/api\/viz_v1.js';                    vizElement.parentNode.insertBefore(scriptElement, vizElement);                <\/script><\/p>\n<p><span style=\"font-weight: 400;\">Today\u2019s new construction homes become tomorrow\u2019s housing market. Without affordable new construction, we find ourselves in a housing market marked by low inventory, high prices and bidding wars\u2014and one where first-time homebuyers are often priced out. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">The average price of a new construction home that sold in the three months through September<\/span><sup><a id=\"ref1\" href=\"#fn1\">1<\/a><\/sup><span style=\"font-weight: 400;\"> was $374,000. Compared with existing homes, new construction homes sold at an average premium in September of $87,000.<\/span><sup><a id=\"ref2\" href=\"#fn2\">2<\/a><\/sup><\/p>\n<p><span style=\"font-weight: 400;\">However, new home price growth has slowed throughout this year. New home prices are up 3.3 percent year over year, which is down from a growth rate of 5.3 percent in January. In contrast, existing home prices grew by 7.9 percent in September compared with 6.6 percent price growth in January. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">The national average cost to a builder constructing a new home\u2014which includes the estimated cost of labor plus materials\u2014surpassed $200,000, or $240,000 for single-family units, in August this year, which is the highest since the Census began reporting it in 1988.<\/span><sup><a id=\"ref3\" href=\"#fn3\">3<\/a><\/sup><\/p>\n<p><span style=\"font-weight: 400;\">Construction costs are rising in part because the availability of construction workers is still <\/span><a href=\"https:\/\/fred.stlouisfed.org\/series\/CES2023610001\"><span style=\"font-weight: 400;\">25 percent below<\/span><\/a><span style=\"font-weight: 400;\"> the peak in 2006 and there is also <\/span><a href=\"https:\/\/www.wsj.com\/articles\/fewer-home-builders-means-happier-home-builders-1494870894\"><span style=\"font-weight: 400;\">less competition<\/span><\/a><span style=\"font-weight: 400;\"> among homebuilders. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">\u201cAfter almost a decade of underproduction, we are finally seeing a slow steady increase in single-family housing starts, up 9 percent from a year ago,\u201d said Redfin chief economist Nela Richardson. \u201cBut high building costs are limiting the construction of homes that today\u2019s buyers can afford. This is why even in the midst of extreme inventory shortages for existing homes, new homes are sitting on the market instead of selling.\u201d<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The labor shortage has been made worse by the recent hurricanes, though <\/span><a href=\"https:\/\/www.nahb.org\/en\/news-and-publications\/press-releases\/2017\/10\/builder-confidence-rises-four-points-in-october.aspx\"><span style=\"font-weight: 400;\">builders\u2019 confidence<\/span><\/a><span style=\"font-weight: 400;\"> has rebounded after a <\/span><a href=\"https:\/\/www.nahb.org\/en\/news-and-publications\/press-releases\/2017\/09\/builder-confidence-drops-three-points-as-hurricanes-add-uncertainty.aspx\"><span style=\"font-weight: 400;\">small dip in September<\/span><\/a><span style=\"font-weight: 400;\">. Renters in the rental market have suffered though as potential first-time buyers are priced out and continue to rent\u2014<\/span><a href=\"https:\/\/fred.stlouisfed.org\/series\/RRVRUSQ156N\"><span style=\"font-weight: 400;\">rental vacancy rates<\/span><\/a><span style=\"font-weight: 400;\"> hit a 31-year low last year.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Housing material costs have also been <\/span><a href=\"http:\/\/money.cnn.com\/2017\/07\/18\/news\/economy\/lumber-prices\/index.html\"><span style=\"font-weight: 400;\">rising<\/span><\/a><span style=\"font-weight: 400;\">, with <\/span><a href=\"http:\/\/markets.businessinsider.com\/commodities\/historical-prices\/lumber-price\/USD\/1.1.2003_17.10.2017\"><span style=\"font-weight: 400;\">lumber prices<\/span><\/a><span style=\"font-weight: 400;\"> recently hitting their highest level on record since January 2003. Prices will likely rise further as a new <\/span><a href=\"http:\/\/money.cnn.com\/2017\/04\/24\/investing\/canada-lumber-tariff-trump\/\"><span style=\"font-weight: 400;\">tax on Canadian lumber<\/span><\/a><span style=\"font-weight: 400;\"> of up to 24 percent has been imposed by the Trump Administration. <\/span><\/p>\n<h3><strong>If You Build It They Will Come<\/strong><\/h3>\n<p><span style=\"font-weight: 400;\">New homes represent a growing share of the market over the past five years\u2014rising from one in 13 homes for sale in September 2012 to one in eight homes in September 2017. With high prices though, the growing share of new construction homes is worsening the housing affordability crisis as starter homes have disappeared. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">\u201cWe would love to build more affordable starter homes, but when high-end homes cost the same to build and are far more profitable, we lose the incentive to build smaller units,\u201d said Isaac Stocks of <\/span><a href=\"http:\/\/www.azurenw.com\"><span style=\"font-weight: 400;\">Azure Northwest Homes<\/span><\/a><span style=\"font-weight: 400;\">, a Seattle-area home builder. <\/span><\/p>\n<p><a href=\"https:\/\/redfin.com\/blog\/state\/California\"><span style=\"font-weight: 400;\">California<\/span><\/a><span style=\"font-weight: 400;\">\u2014the state most emblematic of the nation\u2019s housing affordability crisis\u2014has built the fewest number of apartments and for-sale units per new resident of all states between 2010 and 2016, with just one unit for every four new residents.<\/span><sup><a id=\"ref4\" href=\"#fn4\">4<\/a><\/sup><span style=\"font-weight: 400;\"> This has resulted in a large number of <\/span><a href=\"https:\/\/redfin.com\/blog\/2017\/04\/movement-out-of-california-driver-of-u-s-migration.html\"><span style=\"font-weight: 400;\">California residents moving<\/span><\/a><span style=\"font-weight: 400;\"> to other states.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Other states, by contrast, average more than double that at one new unit for every 1.8 new residents during this period, which is still lower than the 1.6 average of the 1990s (the housing boom of the 2000s averaged one new unit for every 1.4 new residents).<\/span><\/p>\n<p><img decoding=\"async\" src=\"https:\/\/www.redfin.com\/news\/wp-content\/uploads\/2017\/10\/Housing-Growth-vs-Job-Growth.png\" alt=\"Housing Growth vs Job Growth\" data-has-syndication-rights=\"1\" \/><\/p>\n<p>Housing starts\u2014the number of new residential homes that have begun construction\u2014are still 22 percent below their long-term average (see chart). Single-family <a href=\"https:\/\/www.census.gov\/construction\/nrc\/pdf\/newresconst.pdf\"><span style=\"font-weight: 400;\">building permits<\/span><\/a><span style=\"font-weight: 400;\">, which offer a look at what is in the pipeline for new home construction,<\/span><sup><a id=\"ref5\" href=\"#fn5\">5<\/a><\/sup><span style=\"font-weight: 400;\"> were up 9.7 percent year-to-date through September, while multi-family units<\/span><sup><a id=\"ref6\" href=\"#fn6\">6<\/a><\/sup><span style=\"font-weight: 400;\"> are 3.6 percent lower year-to-date. More than three-fourths of the nearly 100 metro areas Redfin tracks had positive growth in the first eight months of the year in single-family permits compared to last year. Therefore, single-family housing starts are expected to continue to grow into next year, and new single-family homes will add to inventory in 2018.<\/span><\/p>\n<p><img decoding=\"async\" src=\"https:\/\/www.redfin.com\/news\/wp-content\/uploads\/2017\/10\/Housing-Starts-Shortage.png\" alt=\"Housing Starts Shortage\" data-has-syndication-rights=\"1\" \/><\/p>\n<h3><b>Metro-Level Highlights for New Construction in the Third Quarter:<sup><a id=\"ref7\" href=\"#fn7\">7<\/a><\/sup><\/b><\/h3>\n<ul>\n<li style=\"font-weight: 400;\"><a href=\"https:\/\/redfin.com\/city\/13415\/TN\/Nashville\"><span style=\"font-weight: 400;\">Nashville, TN<\/span><\/a><span style=\"font-weight: 400;\"> had the highest portion of new home sales over the last three months, with 24 percent of all homes sold being new construction. <\/span><a href=\"https:\/\/redfin.com\/city\/35711\/NC\/Raleigh\"><span style=\"font-weight: 400;\">Raleigh, NC<\/span><\/a><span style=\"font-weight: 400;\"> and <\/span><a href=\"https:\/\/redfin.com\/city\/30818\/TX\/Austin\/\"><span style=\"font-weight: 400;\">Austin, TX<\/span><\/a><span style=\"font-weight: 400;\"> each followed closely behind at 23.2 percent and 18.9 percent, respectively. <\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The four metro areas with the lowest shares of new construction sales were all in New York and New Jersey led by <\/span><a href=\"https:\/\/redfin.com\/city\/2832\/NY\/Buffalo\/\"><span style=\"font-weight: 400;\">Buffalo, NY<\/span><\/a><span style=\"font-weight: 400;\"> at just 0.8 percent of home sales followed by <\/span><a href=\"https:\/\/redfin.com\/city\/2570\/NJ\/Camden\"><span style=\"font-weight: 400;\">Camden, NJ<\/span><\/a><span style=\"font-weight: 400;\"> (1.5%), <\/span><a href=\"https:\/\/redfin.com\/county\/2004\/NY\/Westchester-County\"><span style=\"font-weight: 400;\">Hudson Valley, NY<\/span><\/a><span style=\"font-weight: 400;\"> (1.6%) and <\/span><a href=\"https:\/\/redfin.com\/city\/16162\/NY\/Rochester\"><span style=\"font-weight: 400;\">Rochester, NY<\/span><\/a><span style=\"font-weight: 400;\"> (1.6%). Six of the following seven lowest-ranked metro areas were in <\/span><a href=\"https:\/\/redfin.com\/blog\/state\/California\"><span style=\"font-weight: 400;\">California<\/span><\/a><span style=\"font-weight: 400;\">\u2014each with under one in 40 home sales being new construction.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The metro areas with the highest year-over-year price growth per square foot for new construction sales last quarter were <\/span><a href=\"https:\/\/redfin.com\/city\/1823\/AL\/Birmingham\"><span style=\"font-weight: 400;\">Birmingham, AL<\/span><\/a><span style=\"font-weight: 400;\"> (21.9%), <\/span><a href=\"https:\/\/redfin.com\/county\/2004\/NY\/Westchester-County\"><span style=\"font-weight: 400;\">Hudson Valley, NY<\/span><\/a><span style=\"font-weight: 400;\"> (21.0%) and <\/span><a href=\"https:\/\/redfin.com\/neighborhood\/219261\/NY\/New-York\/Long-Island\"><span style=\"font-weight: 400;\">Long Island, NY<\/span><\/a><span style=\"font-weight: 400;\"> (17.4%). The California Bay Area metros of <\/span><a href=\"https:\/\/redfin.com\/city\/17151\/CA\/San-Francisco\"><span style=\"font-weight: 400;\">San Francisco<\/span><\/a><span style=\"font-weight: 400;\"> and <\/span><a href=\"https:\/\/redfin.com\/city\/17420\/CA\/San-Jose\"><span style=\"font-weight: 400;\">San Jose<\/span><\/a><span style=\"font-weight: 400;\"> each posted negative price growth per square foot for new construction homes\u2014falling 6.2 percent and 4.2 percent year-over-year.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The estimated cost of constructing a new unit during the months of June, July and August this year was the highest in Long Island, NY at an average of $451,000 per home. <\/span><a href=\"https:\/\/redfin.com\/city\/34945\/HI\/Honolulu\"><span style=\"font-weight: 400;\">Honolulu, HI<\/span><\/a><span style=\"font-weight: 400;\"> ($451,000), <\/span><a href=\"https:\/\/redfin.com\/city\/19459\/AZ\/Tucson\/\"><span style=\"font-weight: 400;\">Tucson, AZ<\/span><\/a><span style=\"font-weight: 400;\"> ($272,000), and San Francisco ($269,000) rounded out the top four for the average cost per unit permitted.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Austin, TX, Raleigh, NC and Nashville, TN are building the most homes per capita at 29, 28 and 27 units per 10,000 residents, respectively. In contrast, <\/span><a href=\"https:\/\/redfin.com\/city\/514\/PA\/Allentown\"><span style=\"font-weight: 400;\">Allentown, PA<\/span><\/a><span style=\"font-weight: 400;\"> and Long Island, NY had far fewer new homes in the pipeline at only 0.5 and 1.1 units permitted per ten thousand residents respectively.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">A look at the total volume of building permits reveals that the metro areas poised to build the most new homes in the coming months are <\/span><a href=\"https:\/\/redfin.com\/city\/8903\/TX\/Houston\/\"><span style=\"font-weight: 400;\">Houston, TX<\/span><\/a><span style=\"font-weight: 400;\"> (10,000), <\/span><a href=\"https:\/\/redfin.com\/city\/30794\/TX\/Dallas\"><span style=\"font-weight: 400;\">Dallas, TX<\/span><\/a><span style=\"font-weight: 400;\"> (9,400), <\/span><a href=\"https:\/\/redfin.com\/city\/14240\/AZ\/Phoenix\"><span style=\"font-weight: 400;\">Phoenix, AZ<\/span><\/a><span style=\"font-weight: 400;\"> (7,800), and <\/span><a href=\"https:\/\/redfin.com\/city\/30756\/GA\/Atlanta\/\"><span style=\"font-weight: 400;\">Atlanta, GA<\/span><\/a><span style=\"font-weight: 400;\"> (7,700). <\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Those with the largest year-over-year increase in units permitted include <\/span><a href=\"https:\/\/redfin.com\/city\/13654\/CA\/Oakland\/\"><span style=\"font-weight: 400;\">Oakland, CA<\/span><\/a><span style=\"font-weight: 400;\"> (142%), <\/span><a href=\"https:\/\/redfin.com\/city\/15935\/CA\/Riverside\/\"><span style=\"font-weight: 400;\">Riverside-San Bernardino, CA<\/span><\/a><span style=\"font-weight: 400;\"> (96.7%) and <\/span><a href=\"https:\/\/redfin.com\/city\/17887\/WA\/Tacoma\/\"><span style=\"font-weight: 400;\">Tacoma, WA<\/span><\/a><span style=\"font-weight: 400;\"> (76.9%).<\/span><\/li>\n<\/ul>\n<p><i><span style=\"font-weight: 400;\">In conjunction with its inaugural quarterly report on new residential construction, Redfin is making available on its <\/span><\/i><a href=\"https:\/\/redfin.com\/blog\/data-center\"><i><span style=\"font-weight: 400;\">Data Center<\/span><\/i><\/a><i><span style=\"font-weight: 400;\"> a downloadable set of monthly data on new construction prices, sales, inventory and other new residential market statistics. Redfin is also releasing building permit data\u2014provided by the Census\u2014allowing users to analyze average construction costs and compare the number of units built per capita across regions. Both datasets are available for download at the National, Metro, and County Levels since 2012.<\/span><\/i><\/p>\n<hr \/>\n<p><sup id=\"fn1\">1. September throughout this report is a rolling three-month measure and includes July, August, and September for all new construction data.<a title=\"Jump back to footnote 1 in the text.\" href=\"#ref1\">\u21a9<\/a><\/sup><br \/>\n<sup id=\"fn2\">2. This is up 17 percent from four years prior. The price premium varies considerably when accounting for size and location however. New homes are being built larger than existing as the price per square foot premium was about 2 percent lower for new construction homes, but they also tend to be further away from the urban core; in the Nashville metro area, for example, new construction homes bought in 2017 were typically 22.9 percent further from the city-center than existing homes.<a title=\"Jump back to footnote 2 in the text.\" href=\"#ref2\">\u21a9<\/a><\/sup><br \/>\n<sup id=\"fn3\">3. The average permit valuation for constructing each single-family home varies widely from just $88,000 in Norwich, CT to more than one million dollars in San Francisco in August.<a title=\"Jump back to footnote 3 in the text.\" href=\"#ref3\">\u21a9<\/a><\/sup><br \/>\n<sup id=\"fn4\">4. Four states (Connecticut, Illinois, Vermont, and West Virginia) experienced a decline in population from 2010 to 2016, yet still built tens of thousands of units each during this time period.<a title=\"Jump back to footnote 4 in the text.\" href=\"#ref4\">\u21a9<\/a><\/sup><br \/>\n<sup id=\"fn5\">5. The <a href=\"https:\/\/www.census.gov\/construction\/nrc\/lengthoftime.html\">average length of time<\/a> between authorization (i.e. a permits) and a housing start is about 1 month and most starts are completed within a six months for single-family or about one year for multi-family properties.<a title=\"Jump back to footnote 5 in the text.\" href=\"#ref5\">\u21a9<\/a><\/sup><br \/>\n<sup id=\"fn6\">6. Multi-family units include buildings containing 5 or more units and are largely apartments, but may include condo towers. The complete breakdown of the <a href=\"https:\/\/www.census.gov\/construction\/nrc\/xls\/newresconst.xls\">data is available here<\/a>.<a title=\"Jump back to footnote 6 in the text.\" href=\"#ref6\">\u21a9<\/a><\/sup><br \/>\n<sup id=\"fn7\">7. Only metropolitan divisions with populations greater than 750,000 people were included in this highlights section.<a title=\"Jump back to footnote 7 in the text.\" href=\"#ref7\">\u21a9<\/a><\/sup><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Under building of new homes and high construction cost perpetuate the affordable housing shortage.<\/p>\n","protected":false},"author":13500,"featured_media":47443,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"site-sidebar-layout":"default","site-content-layout":"default","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"default","adv-header-id-meta":"","stick-header-meta":"default","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[27,8],"tags":[39],"coauthors":[],"class_list":["post-59860","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-affordability","category-housing-market-news","tag-new-construction"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v24.7 (Yoast SEO v27.4) - 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