A recent Redfin study found that roughly 31.8% of single-family homes listed for sale in the U.S. in Q4 were new construction. That is similar to the highest percentage of any fourth quarter ever recorded—an estimated 31.9% a year earlier.
Why are newly built homes taking up a growing share of for-sale housing pie?
- Homebuilding has increased. Homebuilding has been on an upward trajectory since 2009, as builders have slowly climbed their way out of the hole caused by the Great Recession. Construction also jumped during the pandemic as builders responded to surging homebuyer demand fueled by record-low mortgage rates.
- The number of homeowners putting their houses on the market has decreased over the last year and a half. That’s because mortgage rates started rising in 2022 and jumped to a 23-year high in 2023, prompting many homeowners to stay put instead of selling and losing the rock-bottom rate they scored during the pandemic. While mortgage rates have fallen a bit in the last few months, this “lock-in effect” continues to hamper listings, which are higher than they were a year ago but remain far below pre-pandemic levels.
To draw in more bidders and offload inventory, homebuilders have started offering generous concessions, such as paying for mortgage rate buydowns. This has made it hard for some individual sellers of existing homes to compete for homebuyers.
“Newly built homes are selling quickly right now because builders are offering such good discounts,” said Heather Mahmood-Corley, a Redfin Premier real estate agent in Phoenix. “I recently had a buyer who wasn’t interested in a new construction home, but the builder offered such a good rate—5.25%—that they couldn’t afford not to take it. Another one of my buyers got a $10,000 credit for closing costs from a builder.”
According to Christine Kooiker, a Redfin Premier real estate agent in Grand Rapids, MI, while builders are offering discounts, they’ve also boosted prices.
“One of the builders in Grand Rapids that focuses on entry-level homes now has prices in the mid $300,000 range,” said Kooiker. “Not long ago, buyers could get a new construction home here for $250,000 or $300,000.”
Roughly two of every five—an estimated 42%—new single-family homes that sold in 2022 went for an average of $500,000 or more, up from 30% in 2021 and 18% in 2020.
To read the full report, including more data, charts, and methodology, click here.
