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What goes into a new home’s price? Most consumers have no idea

by Peter Thomas Ricci

top-new-construction-markets-chicagoland-q1-2016

There is a significant disconnect between consumers and homebuilders, according to a new analysis from the National Association of Home Builders.

Comparing Census Bureau data with that of its most recent Home Buyer Preferences Survey, the NAHB found that consumers have a deeply inaccurate idea of how new construction homes are priced. While only 6 percent of new homes are priced lower than $150,000, 31 percent of consumers expect to pay that amount; 15 percent expect to pay less than $100,000.

The costs of acquiring land, developing it into a lot, and building materials (to say nothing of labor costs and regulations) drive up the cost of home construction, the NAHB explained, and consumers are none the wiser to those costs.

Here is a chart spelling out the divide:

Price Range Share of Consumers Expect to Pay that Price Share of New Homes at that Price
Less than $100,000 15% 0%
$100,000 – $149,999 16% 6%
$150,000 – $249,999 28% 29%
$250,000 – $349,999 18% 28%
$350,000 – $499,999 13% 21%
$500,000 – $999,999 8% 15%
$1 million-plus 2% 1%

 

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