Most Americans cannot afford a new construction home
November 14, 2021

New construction home prices are at unseasonable highs, as the median U.S. new home price of $390,900 in August remained commensurate with July’s record. This increase in pricing is outpacing the national median household income, which has decreased 2.9% from 2019 to 2020 to $67,521 – a decline seen for the first time since 2011, with only modest rebounds so far in 2021, according to preliminary forecasts.1 

According to Fannie Mae’s Chief Economist, Doug Duncan; “Affordability remains a challenge, even with mortgage rates near historic lows; if the pace of income growth doesn’t keep up with inflation and interest rates rise more than expected, we’d expect housing activity to slow from our current projections”.

In September, Fannie Mae lowered its 2022 new construction home sale expectations from 846,000 units to 789,000 amidst the building supply constraints and record home price issues the nation is currently facing, foreshadowing an even longer recovery from years of underbuilding.2  

While facing a shortage of housing supply at all price levels, this gap is expected to disproportionately affect lower-income earners in 2022. Households in the bottom 25th percentile of income are estimated to face a shortage of 2.6 million units versus those above the median income expected to face a gap of 650,000 units.2 

To put things in perspective, the minimum total household income for a mortgage on a $390,900 home, with a 6% down payment, typically falls just under $80,000. At this level, nearly 60% of U.S. households would not be eligible. Knock analyzed the top metro areas with the highest percentage of new construction sales to dive deeper into this affordability issue. 

Based on our analysis, we found the following metro areas at both ends of the affordability spectrum based on required household income for the median new construction mortgage in their area;

  • Sacramento (80%), Miami (80%), Las Vegas (65%), Phoenix (63%), and Denver (62%) have the highest percentage of households unable to afford new construction.
  • San Antonio (49%), Oklahoma City (50%), Raleigh (50%), Minneapolis (51%), Atlanta (52%), and Dallas (52%) provide the most accessible new construction for homebuyers.

When comparing the price paid for a new home, we found the average premium of new construction to existing resale to be $68,454. 

  • Metro areas showing the smallest premium for new construction to existing homes include Nashville ($1,300), Raleigh ($4,970), Denver ($9,013), San Antonio ($9,200), and Dallas ($9,847).
  • Those showing the largest premium between new and existing homes include, Miami ($310,000), Baltimore ($186,726), Austin ($126,192), Indianapolis ($109,185), Washington ($100,000), and Sacramento ($100,000).

According to the National Association of Home Builder’s 2021 survey What Home Buyers Really Want, 60% of buyers prefer a new construction home over an existing home.3 For first-time homebuyers in particular, who often struggle with saving for a down payment and are most impacted by rising home prices, this makes affording a new construction home more difficult a task than it is for existing homeowners looking for their next home. During the first 10 months of 2021, first-time home buyers’ average purchase price was $229,000.4 A price range that makes up less than 16% of the new construction market as of August, for a population that makes up nearly a third of all buyers.5

Based on median household income, the average time it takes to save for a down payment on a new construction home for first-time homebuyers is 15 years.

  • The areas with the shortest down payment savings time are Houston, Oklahoma City, San Antonio, and Atlanta at just 12 years.
  • Those with the longest savings periods include; Miami(30), Sacramento(21), Las Vegas(18), and Phoenix(17).
  • In metro areas with below-average levels of new construction transactions, saving’s periods rise significantly. Ranging from 115 years in New York, to 127 in San-Jose, 153 in Los Angeles, and 167 years in San Francisco. 

These exorbitant savings periods reflect the inability of the average first-time homebuyer to obtain homeownership in many of the pricier metros.

Furthermore, affordability concerns persist at a time when the share of smaller inventory homes built by new construction builders are at all-time highs, according to Zelman & Associates’ research.Homes built in the 0-2,249 square foot range have reached 60% of all homes built in the 10th largest markets in 3Q21, a 35% increase from 1Q15. In terms of the average square footage of single-family housing starts, a decline from 2015 to the present has occurred from 2,689 to 2,477 square feet in 2020 amidst surging new home prices. This trend has begun to reverse in 2021, showing growth to 2,513 square feet and, is projected to continue into 2023. The move to larger homes could further impact the average home price over time.

In conclusion, the current supply chain and affordability issues surrounding new construction challenge pre-Covid notions of the relief to the housing market new construction homes bring. If new construction homes do not align with the buying power of the average consumer, benefits of this additional inventory are felt disproportionately throughout the country and are attenuating a much smaller portion of the building gap issue than previously thought. Moving forward, we expect to see a push back in median new construction home pricing as the reality of homeownership of the majority becomes simply too far out of reach.   

Methodology Section 

To determine new construction affordability in the major metro areas across the country, Knock first pulled the top 50 metros by population size and analyzed the average % of new construction transactions. We found that number to be 8%, and from there cut any metro areas that fell below that to control for increased pricing due to limited availability. We reverse calculated the required income on a mortgage that assumed a 6% down payment, as well as a 3.04% interest rate for a 30-year mortgage. Once that number was determined, we were able to use the ACS median household income figures per income bracket to determine the % of households in that metro area that could not afford a new construction home. The average savings period for FTHB was calculated by taking the median HH income and calculating a 2.4% savings rate per year until the average downpayment was reached.


  1. Seeking Alpha. “Median Household Income in June 2021.”, Seeking Alpha, 4,August, 2021, Accessed 2021.
  2. Volkova, Maria. “Fannie Mae cuts origination forecast for 2022.”, HousingWire, 20,September ,2021,
  3. Quint, Rose. “Home Buyers’ Preferences Shift Towards New Construction.”,NAHB, 1 April, 2021, Accessed 2021.
  4. Carroll, Peter. “Who is Most Affected by the Housing Supply Gap?”, Core Logic, 28, April, 2021, Accessed 2021.
  5. National Association of Realtors. “2021 Home Buyers and Sellers Generational Trends Report.”, National Association of Realtors Research Group, 16 March 2021, Accessed 2021.
  6. Zelman & Associates. “Proprietary Look at Builder Price Points -tug of War to Ensure Between Preference and Affordability.”, Zelman & Associates, 7 October 2021. Accessed 2021.
  7. Top 10 Housing Markets with Median Down Payments. Christine Stricker, 2020.,

You can find the full press release here.


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