Builders begin to refocus on entry-level homes Builders begin to refocus on entry-level homes

Builders begin to refocus on entry-level homes

Wednesday, May 16, 2018

Low inventory is impacting home sales across the country and one of the categories that have been hardest hit are entry-level homes. However, according to the latest survey from Builder Online, builders are starting to hone in on starter homes.

Entry-level home construction has seen significant decreases over the past 10 years. In 2006, at the peak of the real estate boom, 443,000 homes priced under $250,000 were built. Over the past decade, that number has dropped significantly, Builder Online reports. At its lowest point, only 146,000 were built in 2014.

Developers began to focus more on move-up and luxury homes, which provide higher margins. In 2014, Builder Online found that entry-level homes were a focus for only one-sixth of the top 200 builders, but more than half were building move-up homes.

The demand for entry-level homes across the country have some builders refocusing slightly, but the market has yet to fully bounce back. In 2017, a quarter of the 200 builders surveyed said 50 percent or more of their closings were in the entry-level market. This is up from 2016, but down from the more than one-third who focused on entry level homes in 2010.

“Experts attribute this to supply constraints like soaring land costs, burdensome entitlement fees, and rising labor and material prices,” Builder Online reports.

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