According to a recent Redfin analysis, 26.8% of single-family homes for sale nationwide in August were newly constructed, the lowest percentage in four years. Compared to 28.2% a year ago and 30.6% two years ago, representing a significant decrease.
The share of new homes in the single-family supply is still much higher than it was prior to the pandemic. The share increased from 15% to 20% in 2018 and 2019 to over 35% in 2022 as demand for homes surged during the pandemic, and it has subsequently declined.
Because the supply of existing homes has increased, newly constructed homes now make up a lesser portion of the inventory than they did a few years ago.
Key Findings:
- The pool of existing inventory is rising as more homeowners list and homes linger on the market. At the same time, some builders are refraining from starting new projects as they try to offload inventory.
- House hunters who are interested in new construction may want to act now, while the pool of new homes is still fairly deep.
Mortgage Trends, Lock-In Effect Impacts & More
Due to extremely low mortgage rates, there were few new listings of existing homes between 2022 and 2023. With the lock-in impact lessening, life circumstances encouraging people to sell, and homeowners hoping buyers will take advantage of slightly lower mortgage rates, more Americans are now advertising their houses. properties are selling in a median of 50 days, which is the longest September period since 2016. At the same time, properties are generally remaining on the market for a long time. When a buyer backs out, even more homes that are under contract are being put back on the market.
Conversely, some homebuilders are beginning to retreat. According to the U.S. Census, housing completions decreased 8.4% and housing starts were down 6% year-over-year in August. Some builders are choosing not to begin new projects because they are still attempting to sell existing inventories, despite the fact that development skyrocketed during the epidemic to fulfill the demand for homes. Some are finding it difficult to do so because of the low demand for home purchases brought on by high property prices, persistently high mortgage rates, and economic uncertainty.
To entice purchasers, several builders are providing incentives like mortgage-rate buydowns, covering closing costs, and new appliances. This is particularly common in states like Texas, Utah, and Florida where new homes are in high demand.
For those who can afford it, now is a terrific moment to purchase a newly constructed home, even though they are usually a little more expensive than existing homes. The greater sticker price could be compensated for by the incentives builders offer.
“Builders are desperate to sell,” said Roze Swartz, a Redfin Premier agent in Houston. “Prices are lower than usual, insurance costs are lower than for existing homes, and buyers have the power because there’s more supply than demand. Builders are buying rates down to 4% or 5% and throwing in $10,000 in closing costs; plus, buyers can breathe easy knowing their home has a new roof, new HVAC system, new everything.”
The pool of newly constructed homes is currently large but is beginning to get smaller, so those looking for a new place might want to move quickly.
“Builders are hesitant to start new projects because in today’s buyer’s market, it doesn’t make financial sense,” said Jesse Landin, a Redfin Premier agent in San Antonio. “The market is oversaturated with new construction, so much so that some local builders are laying off workers—something I’ve never heard of happening before.”
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