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July 2017   Volume 43, Number 7      
 

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Home Builders Target Millennials with Lower-Priced Homes

Millennials are finally starting to buy homes. The trouble is, there simply aren’t enough homes for sale that meet their needs, at least not that they can afford.

The nation’s recovering homebuilders want to step up to the plate, but doing so will hurt their bottom lines. “Since the recovery has really been at the middle end of the market, home prices have gone up and land prices have followed,” said Megan McGrath, managing director at MKM Partners. “So it is very, very hard to make a good profit at a lower price point these days.”

In the wake of the Great Recession, investors both small and institutional began buying hundreds of thousands of foreclosed properties. The overwhelming majority of these properties were originally lower-priced so-called starter homes.

Some of these homes were just a few years old thanks to the massive boom in construction. Rather than sell these homes when prices rebounded, investors have held onto them turning them into single-family rentals, causing an inventory shortage.

Now, the only way for builders to lower prices and is to take a hit to their margins and make their profit on volume, which would require big growth in orders for new homes. So far, we are not seeing that. Builders have been increasing overall production slowly and carefully, but single-family construction is still 18 percent below its 25-year average.

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In this issue:

The Best, Worst Metros for Real Estate Investors

Five States with the Highest, Lowest Cost of Living

Americans’ Confidence in Economy Reaches Post-Election Low

EB-5 Program Extended Through September 2017

Flexible Workspace Real Estate Trend Set to Take Off

Home Builders Target Millennials with Lower-Priced Homes

Housing Starts Decline 2.6 Percent in April

Luxury Real Estate Starting to Cool Off

Market Competition Intensifies for Millennial House-Hunters

How Realtors Are Using Mobile Technology



 


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