At the end of June, many were happy to see existing-home sales increase by 1.4%. As additional data is reviewed, there are signs that point to this being less of a fluke and more of a potential trend. Back in April, the National Association of Home Builders (NAHB) posted the article Home Buyers’ Preferences Shift Towards New Construction which reported:
“60% of people who were looking to buy a home in 2020 said they’d prefer new construction to an existing home.”
It seems today that buyers are now shifting their preferences back to existing homes, though.
The latest Consumer Confidence Survey reveals the percentage of Americans planning to buy a home in the next six months is virtually the same as it was back in March. However, the percentage that plan to buy a newly constructed home is lower for that same period.
NAHB confirms this sentiment in their latest Housing Trends Report. The organization explains that existing homes are now the top preference among today’s buyers over new-homes. Here’s a breakdown of those findings comparing preferences from 2020’s fourth quarter to 2021’s second quarter:
The natural question to ask here is why the shift?
There are several reasons that might be contributing to why buyer preference is shifting. Three causes that are impacting purchasers looking to move in now are detailed below:
- The process may move faster. Builders may not be able to guarantee when the house will be complete and ready for move-in due to supply chain challenges with materials like lumber and appliances. If you buy an existing home, not only is it ready, it also likely has a refrigerator, range, and other necessary home appliances already.
- There are no unexpected costs during the buying process. With the price of land, labor, and lumber being so volatile, many builders are including an escalation clause in the price negotiation to cover rising expenses. With an existing home, the final price you will pay is negotiated upfront.
- Increasing inventory. Although still limited compared to this time last year, existing home inventory has been slowly ticking up month-to-month for multiple consecutive months, creating a more friendly existing-home market for buyers.
If you’re working with a client looking to sell, inform them their house is more attractive to a greater number of buyers as compared to earlier in the year.