The housing market has been top-of-mind for new and would-be homeowners for months, as the Federal Reserve’s aggressive rate hike campaign has kept mortgage rates at highs last seen since 2007.
And it’s not just expensive borrowing costs keeping people in their apartments.
The median existing-home (meaning not a newly built home) price for all housing types in January was $359,000, a 1.3% year-over-year uptick.
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On a yearly basis, in 2022, the median home sale price was $386,300. Existing-home prices have never been that high.
Constructing a home from the ground up has always been an alluring option. However, with escalating construction expenses, the question arises whether building a house is the more cost-effective approach in the current housing market.
Well — the earnings reports from prominent U.S home builders help tell the tale.
- On Tuesday, Tri Pointe Homes Inc TPH beat estimates by an impressive 26%, reporting quarterly earnings of $1.98 on revenues of $1.5 billion, which also beat estimates by 19.37%.
- Last month, PulteGroup, Inc. PHM reported similarly impressive numbers, with quarterly earnings of $3.63, beating estimates by 24.4%, and revenues of $5.17 billion, beating estimates by nearly 13%.
- D R Horton Inc DHI also reported robust earnings, beating estimates by 23% and surpassing revenue estimates by 12.92%.
- NVR, Inc. NVR beat on top and bottom lines as well.
Is the trend becoming clearer? Builders are back in business, adding much needed inventory to a market which saw record lows in 2022.
According to Bloomberg which cited U.S Census Bureau data, builders are most active in Texas, New York, New Jersey, Pennsylvania, and Arizona.
By analyzing inflation-adjusted data, which includes surveyed land prices per median lot size across the country, as well as the regional costs of contracting with home builders and a 10% additional fee for administrative costs, StorageCafe compares these costs to median home prices in each state.
This analysis can help determine whether building a new home could potentially result in savings compared to purchasing an existing one.
|
State |
Total Building Costs |
Median Single Family Home Listing Price |
Difference Building vs. Buying Costs |
|
Hawaii |
$551,000 |
$1,045,000 |
−$494,000 |
|
California |
$495,000 |
$700,000 |
−$205,000 |
|
Colorado |
$492,000 |
$600,000 |
−$108,000 |
|
Utah |
$538,000 |
$635,000 |
−$97,000 |
|
Virginia |
$361,000 |
$458,000 |
−$96,000 |
|
Delaware |
$394,000 |
$490,000 |
−$96,000 |
|
Maryland |
$365,000 |
$460,000 |
−$95,000 |
|
Montana |
$515,000 |
$599,000 |
−$84,000 |
|
Florida |
$375,000 |
$451,000 |
−$76,000 |
|
Idaho |
$505,000 |
$575,000 |
−$70,000 |
|
Washington |
$493,000 |
$559,000 |
−$66,000 |
|
Massachusetts |
$576,000 |
$629,000 |
−$53,000 |
|
Texas |
$361,000 |
$412,000 |
−$51,000 |
|
Oregon |
$502,000 |
$545,000 |
−$43,000 |
|
North Carolina |
$363,000 |
$395,000 |
−$32,000 |
|
Georgia |
$365,000 |
$395,000 |
−$30,000 |
|
Tennessee |
$361,000 |
$374,000 |
−$13,000 |
|
New York |
$524,000 |
$535,000 |
−$11,000 |
While the median priced home in Hawaii lists for just north of $1 million, a potential homebuilder can build one in the tropical islands for roughly half the cost.
A homebuilder can rush to California, where the median lot size is just 0.17 acres to add a fresh build instead of purchasing an existing one.
The potential savings dwindle as you look toward some southern states, but New York offers the smallest savings of $11,000 for building a new home rather than buying an existing build. Still, there are 18 states — or 36% — of the U.S where a would-be homeowner can build a brand new home instead of buying one and still save money.
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© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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