Most Americans Cannot Afford a New Construction Home, a New Analysis By Knock Finds

Miami, Sacramento, Calif., and Las Vegas rank as the most unaffordable markets to buy a new home based on household income; San Antonio is the most affordable

October 28, 2021 5:57 AM EDT

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NEW YORK, Oct. 28, 2021 /PRNewswire/ --The uptick in new construction has been viewed as a positive sign for buyers looking for options in an inventory-starved U.S. housing market. However, a new analysis released today by Knock, the fast-growing digital homeownership platform that brings certainty and convenience to buying and selling homes, finds that most American households are being priced out of the new home market even as builders shift their focus to smaller homes to accommodate the entry-level market.

Wages have not kept up with home price growth, keeping new construction out of reach for many, Knock analysis finds.

With home prices soaring and new construction typically 20% more expensive than existing homes, Knock compared the median household income and the median new home sales price in the nation's largest metropolitan areas with the most active new home markets to determine just how much relief new construction will provide as buyers, especially first-time homebuyers, are grappling with affordability in a highly competitive housing market.

To qualify for a mortgage on a $390,900 home, the median price of a new home sold in the U.S. in August, a buyer making a 6% down payment, the national average, would need an annual household income of just under $80,000. This means nearly 60% of Americans would not be eligible, based on the 2020 national median household income of $67,521.

"This analysis highlights how years of building undersupply and the current supply shortages are disproportionately impacting lower income homebuyers looking for alternatives in a housing market where homes are garnering multiple offers and selling for over asking price," said Knock Co-Founder and CEO Sean Black. "Although more new homes are expected to come onto the market in 2022, wages have not kept up with home price growth, keeping new construction out of reach for many, especially first-time buyers who don't have the benefit of equity from a home sale."

Of the 50 largest metros in which new homes accounted for at least 8% of total home sales, Miami, Sacramento, Calif., and Las Vegas rank as the least affordable new construction markets. Based on household income, 80% of buyers in Miami and Sacramento would not qualify for a mortgage on a median-priced new home and 65% of buyers in Las Vegas are unable to afford a new home. It would take these buyers anywhere from 18 to 30 years to save for a 6% down payment.

Top Five Most Unaffordable New Construction Metros

Metro

Median Existing Home Price

Median New Construction Home Price

New Construction Premium

Average Down Payment

Income Required

Median Household Income

% of House-

holds Priced Out

% New Construction Transactions

Average Savings Period for FTHB

Miami-Fort Lauderdale-West Palm Beach, Fla.

$410,000

$720,000

$310,000

$43,200

$141,430

$60,141

80%

8%

30

Sacramento--

Roseville--Arden-Arcade, Calif.

$550,000

$650,000

$100,000

$39,000

$128,447

$76,706

80%

12%

21

Las Vegas- Henderson-

Paradise, Nev.

$375,500

$441,490

$65,990

$26,489

$89,305

$62,107

65%

14%

18

Phoenix-Mesa- Scottsdale, Ariz.

$410,000

$427,375

$17,375

$25,643

$86,655

$64,427

63%

13%

17

Denver-Aurora- Lakewood, Colo.

$535,000

$544,013

$9,013

$32,641

$108,432

$85,641

62%

9%

16

With some of the highest percentage of new home sales among the major metros, San Antonio, Oklahoma City, Raleigh, N.C., Minneapolis and Atlanta rank as the most accessible markets for new construction. In each of these markets, approximately 50% of households would not qualify for a mortgage on a median-priced new home based on their income. On average, it would take 15 years to save for a 6% down payment on a median-priced new home.

Top Five Most Affordable New Construction Metros

Metro

Median Existing Home Price

Median New Construction Home Price

New Construction Premium

Average Down Payment

Income Required

Median House-hold Income

% of House-

holds Priced Out

% New Construction Transactions

Average Savings Period for FTHB

San Antonio-New Braunfels, Texas

$297,000

$306,200

$9,200

$18,372

$64,707

$62,355

49%

17%

12

Oklahoma City, Okla.

$212,000

$292,800

$80,800

$17,568

$62,701

$60,605

50%

12%

12

Raleigh, N.C.

$375,000

$379,970

$4,970

$22,798

$77,757

$75,165

50%

20%

13

Minneapolis-

St. Paul-

Bloomington, Minn.-Wis.

$341,000

$432,657

$91,657

$25,959

$87,647

$83,698

51%

8%

13

Atlanta-Sandy Springs-

Roswell, Ga.

$335,000

$353,283

$18,283

$21,197

$72,747

$71,142

52%

12%

12

In the markets with the most new homes for sale, the premium for new construction to existing homes on average is $68,454. However, this gap increases significantly in several markets, including Miami, where the median price for a new home is $720,000, approximately $310,000 more than a median-priced existing home.

Top Five Metros with the Largest New Construction Premiums

Metro

Median Existing Home Price

Median New Construction Home Price

New Construction Premium

Average Down Payment

Income Required

Median Household Income

% of House-

holds Priced Out

% New Construction Transactions

Average Savings Period for FTHB

Miami-Fort Lauderdale-

West Palm Beach, Fla.

$410,000

$720,000

$310,000

$43,200

$141,430

$60,141

80%

8%

30

Baltimore-

Columbia- Towson, Md.

$340,000

$526,726

$186,726

$31,604

$105,299

$83,160

58%

9%

16

Austin-Round Rock, Texas

$373,258

$499,450

$126,192

$22,395

$76,497

$59,433

60%

19%

16

Indianapolis-

Carmel- Anderson, Ind.

$250,000

$359,185

$109,185

$21,551

$73,777

$62,505

58%

8%

14

Washington-

Arlington-

Alexandria, D.C.-Va.-Md.-W. Va.

$500,000

$600,000

$100,000

$36,000

$119,061

$105,659

57%

9%

14

Top New Construction Metros Versus Their Relative Affordability

Metro

Median Existing Home Price

Median New Construction Home Price

New Construction Premium

Average Down Payment

Income Required

Median Household Income

% of House-

holds Priced Out

% New Construction Transactions

Average Savings Period for FTHB

San Antonio-New Braunfels, Texas

$297,000

$306,200

$9,200

$18,372

$64,707

$62,355

49%

17%

12

Oklahoma City, Okla.

$212,000

$292,800

$80,800

$17,568

$62,701

$60,605

50%

12%

12

Raleigh, N.C.

$375,000

$379,970

$4,970

$22,798

$77,757

$75,165

50%

20%

13

Minneapolis-

St. Paul-

Bloomington, Minn.-Wis.

$341,000

$432,657

$91,657

$25,959

$87,647

$83,698

51%

8%

13

Atlanta-Sandy Springs-

Roswell, Ga.

$335,000

$353,283

$18,283

$21,197

$72,747

$71,142

52%

12%

12

Dallas-Fort Worth-Arlington, Texas

$380,000

$389,847

$9,847

$23,391

$79,631

$72,265

52%

18%

13

Houston-The Woodlands-

Sugar Land, Texas

$301,000

$326,207

$25,207

$19,572

$67,664

$69,193

54%

15%

12

Nashville-

Davidson--

Murfreesboro-Franklin, Tenn.

$389,700

$391,000

$1,300

$23,460

$79,827

$70,262

54%

16%

14

Charlotte-

Concord-Gastonia, N.C.-S.C.

$335,000

$362,900

$27,900

$21,774

$74,552

$66,399

56%

13%

14

Washington-

Arlington-

Alexandria, DC-Va.-Md.-W. Va.

$500,000

$600,000

$100,000

$36,000

$119,061

$105,659

57%

9%

14

Jacksonville, Fla.

$305,000

$340,000

$35,000

$20,400

$70,254

$65,880

57%

15%

13

Indianapolis-

Carmel-

Anderson, Ind.

$250,000

$359,185

$109,185

$21,551

$73,777

$62,505

58%

8%

14

Baltimore-

Columbia-

Towson, Md.

$340,000

$526,726

$186,726

$31,604

$105,299

$83,160

58%

9%

16

Richmond, Va.

$315,000

$388,344

$73,344

$23,301

$79,244

$68,324

58%

10%

14

Orlando-

Kissimmee-

Sanford, Fla.

$329,900

$375,000

$45,100

$22,500

$76,824

$61,876

60%

14%

15

Austin-Round Rock, Texas

$373,258

$499,450

$126,192

$22,395

$76,497

$59,433

60%

19%

16

Tampa-St. Petersburg- Clearwater, Fla.

$305,000

$363,900

$58,900

$21,834

$74,740

$57,906

61%

11%

16

Denver-Aurora- Lakewood, Colo.

$535,000

$544,013

$9,013

$32,641

$108,432

$85,641

62%

9%

16

Phoenix-

Mesa

Scottsdale, Ariz.

$410,000

$427,375

$17,375

$25,643

$86,655

$64,427

63%

13%

17

Las Vegas-

Henderson-

Paradise, Nev.

$375,500

$441,490

$65,990

$26,489

$89,305

$62,107

65%

14%

18

Miami-Fort Lauderdale-West Palm Beach, Fla.

$410,000

$720,000

$310,000

$43,200

$141,430

$60,141

80%

8%

30

Sacramento--

Roseville--

Arden-Arcade, Calif.

$550,000

$650,000

$100,000

$39,000

$128,447

$76,706

80%

12%

21

"If new construction homes do not align with the buying power of the average consumer, benefits of these added units are felt disproportionately throughout the country and are attenuating a much smaller portion of the building gap issue than previously thought," said Alexandria Quintana, Knock Research Analyst and the report's author.

To view the full report, including charts and methodology, please visit: Most Americans Cannot Afford a New Construction Home

About KnockKnock makes home buying simple and certain by transforming all buyers into cash buyers and giving them complete control of the process from their phone. Knock's flagship Home Swap™ product empowers consumers with a cash-like offer to buy the home they want before selling the home they have, providing the convenience of not having to live through repairs or showings in the process. Knock GO™ (Guaranteed Offer) is a cash-backed home loan solution for first-time homebuyers looking to compete in today's hot housing market.

Launched in 2015 by founding team members of Trulia.com, Knock has raised more than $600 million in debt and equity from top-tier investors, including RRE Ventures, Foundry Group, Redpoint, Greycroft, Corazon Capital, Correlation Ventures, Great Oaks Venture Capital and FJ Labs. The National Association of Realtors®, through its investment arm Second Century Ventures, is a strategic investor in Knock, giving its 1.5 million members the ability to market Knock's homeownership solutions to their clients. Knock currently operates in 65 markets nationwide and plans to be in over 100 markets by 2023.

Contact: pr@knock.com

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SOURCE Knock



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