The housing market has been slowly cooling down since July. Even so, homes have been selling at a very brisk pace for the past two years, despite steadily rising home prices

Experts say, however, that more homes would have sold if agents could have found the inventory. This was a problem for many first-time home buyers who were unable to find starter homes in their price range in many parts of the country.

COVID did have some impact on home inventory, mainly by attacking older Americans and taking them out of their homes. However, Americans in general are living longer. More are hoping to remain in their homes longer

That, and builders don’t seem to be building new starter homes. So, what are they building?

A quick search of Zillow’s online home marketplace will reveal properties like this $11.5 million mansion in Florida’s trendy Reunion Resort. The home is brand new and boasts 21,400 square feet, 15 bedrooms, 17 full baths & 2 half baths, an indoor basketball/sport court, golf simulator, arcade with games, gym, and two full-length bowling alleys. The buyer will also find an in-home spa and sauna, a movie theater and a whole house laser tag system.

It doesn’t take an economics degree to know that the profit earned on luxury homes is significantly more than on homes for first time buyers. With demand for housing still high, they seemingly have no incentive to increase inventory on the low end.

Plenty of buyers are still in the market and lumber prices are finally coming down, so builders have good reason to be optimistic. 

Earlier this month, the builder confidence survey from the National Association of Home Builders and the resulting Wells Fargo Housing Market Index rose 4 points to 80. Anything over 50 is positive. 

One would think that, with the demand for homes for first time buyers so high, someone would jump in and seize the opportunity. While per-unit profit may be lower, volume is higher, demand is greater, and time on market is typically significantly lower.    

NEXT Mortgage News logo

Stay in the know

Get the daily intel that impacts your customers, employees and market. 

Up NEXT eNewsletter — Industry news

Thank you!

Share This