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November 25, 2023 7:28 AM | 3 min read
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With fewer people listing their homes for sale and a surge in homebuilding activity, newly built homes are making up a growing share of houses for sale.
New home sales typically make up 10% of the market, but these days, they account for nearly one-third of housing inventory nationwide, according to real estate platform Redfin. New homes accounted for 30.6% of U.S. single-family homes for sale in the third quarter — the highest share of any quarter on record.
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“Sellers are facing tough competition from homebuilders, who are sometimes offering buyers up to $30,000 worth of concessions,” said Kim Lots, a Redfin Premier real estate agent in Phoenix. “With that kind of money, a buyer can cover closing costs and upgrades and buy down their mortgage rate. In some cases, people who purchased a house from a builder a year ago are selling and competing against that same builder for buyers.”
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The decrease in existing home listings coincides with surging mortgage rates that have reached a 23-year high of about 8%, according to real estate platform Redfin.
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As builders ramp up construction and offer more incentives to attract buyers, new home sales will increase 12.3% this year and 13.9% in 2024, according to the National Association of Realtors.
“New construction is the only option for many buyers,” Shauna Pendleton, a Redfin agent in Boise, Idaho, told Realtor Magazine. “A lot of buyers want to secure a home now because they’re worried prices are going to go back up, and new construction is more plentiful, with perks that are hard to pass up.”
According to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index, 55% of homebuilders say they’re using incentives such as buying down mortgage rates or free home upgrades to boost sales. About one-quarter say they’ve reduced prices by an average of about 6%.
Housing starts are up substantially. Single-family starts are up by 9.5% compared to a year ago, according to data from the Census Bureau and the U.S. Department of Housing and Urban Development. The West is seeing the biggest increase in homebuilding with single-family starts up about 29%, followed by a rise of 12.5% in the Midwest.
“With many homeowners choosing to stay in their existing home to preserve their low mortgage rate, demand for new-home construction pushed up single-family starts in July, even as builders continue to struggle with increased uncertainty stemming from rising rates,” NAHB Chairperson Alicia Huey told Realtor Magazine.
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