Executive Summary: A Grounded Perspective
While headlines in recent times have been filled with words like "slowdown" and "decline" regarding the U.S. housing market, it's essential to zoom out and get a broader perspective. For instance, even though new construction starts in 2022 fell by 3% compared to 2021, the annual starts still totaled over 1.5 million, the highest since 2006. However, challenges like skyrocketing rents, spiking mortgage rates, and cooling home prices did pose hurdles, especially for first-time buyers[^4^].
Key Insights from the Report
Location and Customization Rule: New construction buyers are primarily concentrated in the South, especially Texas and Florida. A significant 35% of these buyers want a home they can build from scratch, showing a 10% increase from 2021[^6^].
Digital Tools are a Game-Changer: A whopping 43% of new construction buyers feel confident making an offer on a home after seeing it virtually but not in person[^6^]. This shift towards digital tools, especially 3D virtual tours, has revolutionized the home buying experience[^16^].
The Evolution of New Construction Buyers: The typical new construction buyer in the U.S. is 44 years old, partnered o
r married, with a college degree, and has a median income of $110,000[^8^]. There's also a rising enthusiasm for customization, with 35% of buyers wanting to customize their home during construction[^9^].
Demographics of New Construction Buyers: According to Zillow's comprehensive study, "new construction buyers" are defined as household decision-makers aged 18 or older who moved to a newly built primary residence that they purchased in the past two years1. This residence had to be constructed within the last two years, and they must be the first household to occupy it. To ensure the study's national representativeness, Zillow balanced the initial recruitment based on several demographic characteristics from the U.S. Census Bureau's 2019 American Community Survey (ACS). These characteristics include age, relationship status, income, ethnicity/race, education, region, and gender1.
Financing Challenges: With the median sales price for newly built homes being roughly $60,000 more than existing h
omes, financing has become a significant concern. Interestingly, 32% of new construction buyers used retirement funds as part of their down payment[^12^].
The Power of Contract Contingencies: With mortgage rates witnessing a surge, contract contingencies, especially those related to financing and home sale, have become crucial for buyers[^13^].
Key Insights on Buyer Profiles
Smart Home Features: A significant 61% of new construction buyers consider smart home capabilities extremely important, compared to just 29% of existing home buyers[^26^]. This indicates a growing trend towards homes equipped with the latest technology.
Investment Opportunities: With economic uncertainties looming, new construction buyers are increasingly viewing their homes as more than just living spaces. Over 80% of them believe it's crucial for their home to have a good potential to increase in value[^22^]. Furthermore, there's been a steady rise since 2019 in the number of buyers hopi
ng to gain rental income from their properties.
Community Importance: A notable 53% of new construction buyers emphasized the importance of community in 2022[^26^]. This could be attributed to the changing work dynamics, with more people working from home and seeking a sense of community within their living spaces.
Rental Income Potential: Low mortgage rates in the past have spurred investments in second homes for rental purposes. Even with rising rates, almost half of the new construction buyers were interested in rental opportunities[^26^]. Homes with guest houses or accessory dwelling units (ADUs) that can be rented out short- or long-term might be particularly appealing to today's buyers.
Takeaways
Embrace Customization: Customizing a home has a growing appeal, with 56% of buyers showing interest in it[^14^]. If you're considering buying, think about the customization options available to you.
Consider Location Flexibility: More buyers are now open to new homes in older developments. In 2022, 33% of buyers chose a new construction home in an existing community[^10^].
Trusted Agents: New construction buyers prefer agents from recognizable brokerages and those with prior experience[^11^]. If you're on the hunt, consider partnering with a trusted agent.
Digital Tools are Here to Stay: With 85% of buyers more likely to view a home with an online floor plan they like, it's clear that digital tools are not just a trend but a mainstay in the home buying process[^18^].
In conclusion, the 2023 housing trends highlight the evolving preferences and challenges faced by new construction buyers. As always, The Gettings Group is here to guide you through these trends and help you make informed decisions. Stay tuned for more insights and updates!
Want the full report? You can download it here: Zillow’s Consumer Housing Trends Report 2023
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