New Construction Buyer Mindsets — What’s Changed in 2020

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New construction (NC) buyers* in this year’s survey say they found their homes more quickly than last year’s — and that may be because more of them focused solely on buying a newly built home. In fact, NC buyers appear to be generally more ardent about new construction this year than they were in last year’s survey.

For instance, 40% of NC buyers say they are only interested in a brand new home, compared to 32% last year. And fewer NC buyers are even willing to consider existing homes, even though the housing market is starved for inventory. In 2019, 45% said they were more interested in new construction, but were willing to consider existing homes. This year, only 35% say that.

The stronger interest in new construction may be why 23% reported finding their home in less than four weeks this year, compared to 16% in 2019. Or it may be that fierce competition for homes is prompting quicker decisions once buyers find a home that works for them.

Whatever the reason, the typical NC buyer now spends two months searching, a month shorter than last year.

Smaller, less expensive options gaining appeal

When they do find a home, more NC buyers are choosing smaller homes this year than last. Small homes — defined as those with less than 1,000 square feet — were purchased by 9% of NC buyers. That’s 6 percentage points higher than last year, a reflection perhaps that slightly more homes are being built in urban areas or that the industry is offering slightly more options that trade size for affordability.

Still, a majority of NC buyers continue to purchase medium sized homes, defined as those between 1,000 and 2,999 square feet. Two out of three buyers (66%) bought one this year, similar to 67% last year. Large homes of 3,000 square feet or more account for about 24% of sales. 

The smaller sizes appear to be reflected in the sticker price paid by NC buyers. Last year, only 9% of NC buyers paid less than $100,000 for their home; this year, 19% reported paying that. The growth in households buying less expensive new construction homes coincides with a 10-point drop in the share of buyers who pay between between $200,000 and $299,000 — 21% of NC home purchases fell in that range in the 2020 survey, compared to 31% in 2019.

A shift in home feature preferences 

The types of home features NC buyers find very or extremely important remains largely the same as last year, with a few notable exceptions.

While air conditioning, preferred number of bedrooms and bathrooms and preferred floor plans continue to top the list of important home features, more buyers this year than last year identified rental income, smart technology and space for cars as important.

Nearly a third (32%) of NC buyers say the opportunity to generate income by renting out the entire home is very or extremely important to them compared to 23% who said so last year. Home-sharing also grew in importance: 27% say generating income by renting out a portion of their home while they live there is very or extremely important, compared to 22% in 2019.

Smart home technologies also became more significant to buyers, a reflection perhaps of the proliferation and growing comfort people have with devices that provide everything from security to temperature control. This year, 45% of NC buyers consider smart home capabilities very or extremely important, an 11 point increase over 2019.

Americans’ love affair with their cars also is reflected in buyer preferences, with 74% of NC buyers rating off-street parking or a garage as very or extremely important, and 67% assigning the same level of importance to an assigned parking space. Both items are 6 points higher than last year, and may reflect a desire to protect what has become an expensive investment. (The estimated average transaction price for a light vehicle was $38,948 last year, according to a Kelley Blue Book analysis.) Given the slight urban skew in new construction this year, the importance of parking also may be related to the scarcity of parking in crowded cities.

Top reasons for buying new construction

New construction’s appeal remains rooted in many of the same reasons that people have cited in the past as their motivation for buying new construction. 

The most notable year-over-year change in reasons for buying new construction — in fact the only change of any significance — is the appeal of free builder upgrades. This year, 14% of NC buyers cited it as one of the top three reasons they bought a newly built home; last year, only 9% cited upgrades. 

“Desirable location” remains the top reason (39%), followed by appealing home features (38%) and everything in the home being new or never used (37%).

Builders can take heart in knowing that buyers continue to appreciate the ability to customize their home features and select their floor plan. All told, 30% of NC buyers say one of the top reasons they purchased a newly minted home was because it was the best value for their money.

* 'New construction home' is a home built in the past two years that no one had previously lived in. 'New construction buyers' are households who’ve purchased and moved into a new construction home within the past two years.