Households that purchased homes in 2017 earn more than two-thirds of households in the United States, up almost 3 percent from 2012. Home buyers who earn less than $50,000 a year dropped to about 28 percent, down more than 7 percent from 2012. This implies that the credentials for being a home buyer in the U.S. are veering toward affluence. So, what does this mean for the housing market, and how will it impact new home sales? The home builder warranty pros at PWSC discuss the impact of the rise in residential real estate purchases by six-figure earners.
Low Inventory Encourages Sales
Six-figure earners are beginning to take up a more substantial portion of the housing market partly due to inflation –– salaries in the U.S. have always trended toward a general increase. However, Zillow’s analysis was adjusted for inflation, so this doesn’t explain the rapid uptick of six-figure home buyers in recent years. A primary reason that high-earners are buying more homes is low inventory. Low inventory has led to a swift rise in home values and sale prices, and this rise has significantly outpaced wages. As a result, there is more competition in the market and more instances of bidding wars, which high-earners tend to win. Zillow’s analysis showed a nationwide affordability crisis, but some cities including Houston, Texas, Denver, Colorado, and Seattle, Washington showed the most drastic increase in home values.
Will a Shift in Buyer Income Lead to New Home Sales?
Will this shift in buyer income lead to new home sales? While the portion of home buyers who make at least $100,000 a year is larger than it used to be, this doesn’t necessarily mean that incomes are increasing overall. In fact, as mentioned above, the shift is due in part to listing prices rising quicker than wages. More six-figure earners are purchasing property because fewer and fewer households that earn under $100,000 are able to afford homes. Between 2012 and 2017, income rose by 11 percent while U.S. home values increased by 36 percent. According to Zillow’s analysis, this means that 3.5 million fewer households are able to buy homes now than they were in 2012.
How New Home Builder Warranties from PWSC Can Help the Housing Market
Nearly half of renters who moved in 2018 considered purchasing a home though ultimately decided to continue renting. One third of renters said that they couldn’t afford to buy. Buying a home requires a significant upfront expense including a down payment and closing costs. Plus, buyers might need to pay for repairs or improvements on their homes which can quickly add up. In addition to adding new inventory by building homes, new construction home builders can help the housing market by offering builder structural warranties which lower a buyer’s risk in purchasing a home.
Regardless of household income and property values, home builders can increase buyer confidence and boost sales with new construction home warranties. Find a sales director in your area to learn how PWSC can help your bottom line.