'If You Build It They Will Come': New Construction's Influence on Housing Affordability

New construction helps drive the housing market, but rising costs are limiting housing inventory, financially excluding potential homebuyers with higher home prices.

According to Redfin's data, existing home prices went up 7.9 percent in September versus 6.6 percent price growth in January, while new home price growth has slowed to 3.3 percent year over year from 5.3 percent in January. An underlying factor is rising housing material costs; lumber prices have reached record highs, and may continue to increase due to the new tax increase of nearly 24 percent on Canadian lumber.

“We would love to build more affordable starter homes, but when high-end homes cost the same to build and are far more profitable, we lose the incentive to build smaller units,” said Isaac Stocks of Azure Northwest Homes, a Seattle-area home builder.

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