High-End Markets Offset Costs for Builders

Some of the nation's biggest cities with the highest priced homes are experiencing inventory gains as builders mitigate growing costs with high-end construction projects.

The cost of materials, labor, and decreasing land availability have all pushed builders toward the trade-up or luxury markets to offset expenses, explains Realtor.com chief economist Danielle Hale. The data bear out: the share of homes listed above $350,000 grew 5.7 percent annually, yet the inventory of homes being sold for less than $200,000 fell 15.6 percent, MarketWatch reports.

Over the past few years, the number of homes listed for sale has shrunk considerably as more existing homeowners chose to stay put and homebuilding activity slowed to a crawl. Housing inventory continues to shrink, decreasing 4 percent year-over-year in July. Nevertheless, that’s slower than the 8 percent average rate of decline posted over the past year. Builders are also sensitive to market sentiment. If buyers are indeed getting discouraged, whether because of the high home prices, rising mortgage-related costs or growing concerns about a potential recession, that could ultimately discourage new home building.

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