In the last few years, location and work space were priorities for home buyers; now affordability is top of mind for those looking to move. Luckily for buyers interested in new construction homes, the National Association of Home Builders reports that 31% of its members are reducing their prices, and 57% are offering special incentives to entice buyers.
For new construction buyers like Stacy in Beaverton, OR, affordability includes the need to sell her current home before she can move. Stacy was drawn to new builds because she can customize floor plans and fixtures — but she knew that shifting construction schedules add a layer of complexity to the moving process. To alleviate these concerns, Stacy sold her existing home to Opendoor and utilized our Homebuilder Partnership Program, which allows customers to choose, and change, their closing date as far out as nine months. “It was so stress-free with Opendoor,” said Stacy. “Because of delayed city paperwork, I had to change my closing dates numerous times. I was worried about the additional costs of the process, and absolutely couldn’t have moved into my new construction home without Opendoor’s flexible closing date program– it put my mind at ease.”
Stacy is one of thousands of new construction buyers who have used our Homebuilder Partnership Program. To better understand how buyer sentiment and behaviors are changing amid shifting market conditions, we surveyed new construction home buyers in the U.S., including those who bought pre-pandemic (2-3 years ago), those who bought more recently (within the last year) and prospective buyers. Notably, 85% of buyers across all generations spent extra on energy-efficient appliances, and a resounding 84% of those felt that they saved money because of it– leading to a 95% satisfaction rate.
Buyers are budgeting, and their preferences are changing
With uncertain market conditions and rising mortgage rates, more buyers are budget-minded. Significantly more (93%) new construction home buyers who bought in the past year said they set a budget—that’s 9% more than those who bought 2-3 years ago (84%).
Not all buyers across age groups are as budget-minded. After reviewing their budgets, significantly more (52%) Boomers indicated they stuck to it, while millennials and Gen Xers opted to increase (26% and 39% respectively).
What’s the biggest budget category for those looking to buy? It was a tie for first place. Prospective buyers spent or planned to spend the most on the kitchen and bedrooms (54% each); bathrooms coming in third (42%).
However, budget allocation has changed recently. We found that 36% of those who bought a new construction home 2-3 years ago said the bedroom was the most important vs. only 19% of buyers in the last year.
Spending more than expected
If you think you will go over budget, you probably will. Over half (53%) of prospective buyers anticipated going over budget, and about the same number (52%) of those who bought said they did exceed their budget.
Even though buyers allotted the most budget for the kitchen, bedrooms and bathrooms, they still exceeded their estimates. 47% of buyers said they went over budget on their kitchens, 32% on bathrooms, and 31% on bedrooms.
However, budget-busting varied by region. Overall, southerners were least likely to go over budget (45%), followed by those in west (55%), northwest (56%) and northeast (59%).
Do-It-Yourself (DIY) is another approach to saving costs. When asked if they would be likely to do DIY projects in order to save, 35% of Gen Xers, 33% of Millennials, and 27% of Boomers said they would.
When it comes to a building timeline, time is money. Over half (53%) of all buyers were or are willing to pay more to complete their home faster. Regionally, those in the northeast are more open to paying extra for speed (69% vs. 53% national average), while those in the south (45%) are least open to incurring an additional cost.
What if buyers had more money in their budget? An increased budget of 20% will likely lead to upgrades: 63% of respondents said they would make more enhancements, 36% would choose a different floor plan/layout, and 25% would opt for a different location. The most common lifestyle enhancements were swimming pool (50%), game room (41%), home theater (39%), and wine cellar (29%).
When are buyers $aving and when are they $plurging?
There’s hope for those trying to stick to their budgets. About 2 in 5 (43%) of total buyers wanted to splurge on certain features, but resisted and saved instead.
What amenities are most important these days? When asked to rank the importance of new construction home amenities, energy-efficient features and appliances topped the “very important” list (83%), followed by an office or work area (75%), and landscaping (73%).
Energy efficiency and landscaping are increasingly more important than they used to be.
Energy efficiency importance last year: 83% vs. 75% 2-3 years ago
Landscaping importance last year: 73% vs. 61% 2-3 years ago
The top splurge feature may surprise you– it’s beneath your feet. Flooring topped the list with 60% of buyers ranking it first on their splurge list, followed by energy-efficient features or appliances (56%), and countertops (55%).
Countertops still matter, but a little less than they used to. While they’re still among the top important items in a new construction home, their prominence may be shrinking: – from 65% of those who bought 2-3 years ago, to 51% among buyers last year and 52% of prospective buyers.
Floor plans affect budgeting. The top five considerations when choosing a floor plan are the number of bedrooms (56%), kitchen size (55%), style (49%), total square footage (49%), and budget/cost (45%).
Energy-efficient appliances and features are paying off
Energy efficient appliances are top of mind, and budget, for every age cohort. Most buyers (85%) said they spent or planned to spend on energy-efficient features and appliances. The number of buyers across age groups who invested in energy efficiency increased 12% from those who bought 2-3 years ago (71%) to those who bought in the past year (83%).
Interest in energy efficiency isn’t going away. 91% of prospective buyers are exploring energy-efficient enhancements now, a big jump over the 77% of buyers 2-3 years ago who said they considered them.
Energy efficiency has paid off for the vast majority of buyers. Nearly all (96%) are happy with the decision to spend more on energy-efficient features or appliances and a national average of 8 in 10 (84%) feel that they saved money because of it. We saw variations across regions, however: 96% in the northeast, 91% of those in the west, 77% in the south, and 69% in the midwest were satisfied with their decision to spend more on energy-efficient features.
How and why are consumers choosing their builder?
Money isn’t all that matters; so does the builder. Both previous and prospective buyers ranked “trustworthiness” most important (63%, 70% respectively), followed by “has a good reputation” (60% previous, 61% prospective), and finally cost-effectiveness (36% previous, 42% prospective).
Buyers value builders differently based on region.
South: 71% look for having good reviews/good reputation (10 pts higher than national average of 61%), while that matters less in the west (53%).
In the northeast, buyers value responsiveness 10 points more than in the midwest, south and west (43% Northwest vs. 33% in the midwest, south and west).
Cost of construction does matter. A resounding 2 in 3 (66%) of those who bought a new construction home in the past year said they did select a builder based on cost.
The wallet is speaking louder these days because only 55% of those who bought 3 years ago said they chose a builder based on cost (up 10% from the past year).
Builder choice paid off, with 9 in 10 of buyers saying they are/were happy with the decision to choose a builder based on cost.
The builder also plays a part in setting the budget. Of the total buyers (92%) who set a budget, nearly 3 in 4 (72%) got or will get help from their builder.
Millennials and Gen Xers rely more on the builder’s budget expertise. Millennials were the most likely to get budget help from builders (75%) vs. Gen Xers (73%) and Boomers (65%).
Are you thinking about buying or selling a home sometime soon? Whether you’re purchasing a new construction home and selling your existing home, as Stacy did, or buying an existing home, Opendoor can help.
Alex Toth is a General Manager of Opendoor’s Homebuilder Partnership Program
The Opendoor survey was conducted online by Strategence among 705 nationally representative U.S. new construction home buyers and prospective buyers. For the purposes of this report, millennials are defined as ages of 25-40, Generation X is defined as ages 41-56 and Boomers are defined as ages 57-75.