The opportunity for attainable homes continues to present itself to the factory-built housing industry. We discuss the opportunity at conferences, meeting rooms, strategy sessions, but continue to account for only 8-12% of new housing starts – all new housing starts. Innovation and expansion is difficult because it usually requires something more or different from what has brought success in the past. We make a great living being retailers, and community operators – but we are stagnant. I admit there are a few of us that are turning on the developer, supplier and financier to a new approach (for us) – but if we intend to offer our viable solution for housing more families, we need to scale up sooner than later. Here is some more support for this argument.
In 2023, only about 16% of new site-built single-family homes in the U.S. were under 1,600 square feet (estimated to be 151,442), although demand for smaller homes was higher, with 26% of buyers seeking homes in that size range. This reflects a growing challenge in the market, as builders tend to favor larger homes to compensate for older, smaller stock. Additionally, home prices have escalated significantly, with the median price of new single-family homes reaching $428,600 by the end of 2023.
For 2024, early data suggests that similar trends are continuing. Builders are still producing fewer small homes, and rising construction costs, inflation, and supply chain issues have made it difficult to keep home prices under $350,000, especially for newly built homes. These factors are impacting affordability, particularly in the 1,600 sq. ft. and smaller segment, which remains underrepresented in new home starts despite buyer interest.
Additionally (as if we need more reasons to build more), in 2023, new site-built homes priced under $350,000 accounted for a smaller share of the market compared to prior years. Approximately 25% of new homes sold in 2023 fell below this price point, reflecting a decline due to increasing construction costs and rising home prices, and in the same time period, only about 5% of newly constructed single-family homes in the U.S. were sold for less than $250,000 – a challenge in the affordability landscape.
The overall median price for new homes has steadily risen, with the median sales price for new houses being around $430,000 by mid-2024, indicating that affordability remains a challenge for many buyers according to The Federal Reserve Bank of St. Louis and National Association of Home Builders (NAHB).
Looking ahead to 2024, the outlook remains similar. Despite demand for homes under $250,000, it is expected that only a small portion of new homes will meet this price point due to ongoing cost pressures. Many buyers looking for homes at this price level may have to turn to the existing home market, though inventory remains tight, forcing prices to increase importunately (Census.gov) (National Association of Home Builders).
Thus, the construction of new homes under $350,000 and certainly those under $250,000 will likely continue to be a small percentage of the overall market in 2024. This is an invitation for our industry to step up.
