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Builders cater to upscale buyers

By Judy Martel · Bankrate.com
Thursday, October 24, 2013
Posted: 4 pm ET

Responding to a post-recession environment that is favoring the affluent, new-home builders are targeting wealthier buyers, leaving fewer options for entry-level house hunters.

Pulte Homes, K. Hovnanian Homes, D.R. Horton and other major builders are constructing pricier homes, according to The Wall Street Journal, to meet the demands of move-up buyers. These new homes typically cost $300,000 more than the average first-time buyer can afford.

Builders, not buyers, are movin' on up

Sales of lower-priced homes have been falling off since the recession, causing builders of those homes to move to higher-priced properties. KB Home, for example, saw its percentage of first-time buyers drop from 67 percent in the second quarter of 2012 to 54 percent in the second quarter this year. The builder has since moved up in price point, with the average selling price of one of its homes rising 22 percent in the past year to $299,100.

Some of the reasons for the shift include a drop in the number of first-time buyers, the rise in mortgage rates, and stricter lending requirements. Additionally, the affluent tend to have more money invested in the stock market -- which has been on a bull run -- and have seen greater increases in the values of their existing homes.

David Crowe, chief economist for the National Association of Home Builders, told The Wall Street Journal that it could be years before first-time buyers get back in the market and, in the meantime, builders are catering to wealthier buyers who don't have a problem obtaining a mortgage or paying a sizable down payment.

Keep up with your wealth and mortgages and follow me on Twitter: @JudyMartel.

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