New Homes Make Up Nearly One-Third Of The Market
As high rates keep sellers locked in their current homes, new homes are making up an increasing share of the market.
Newly built homes made up almost a third of all single-family homes on the market in Q2 2023 (31.4%), according to a new report from Redfin.
This is up 30.3% YOY and almost double the share from Q2 2019 (17%). It’s a new record for any second quarter in Redfin’s data, though not the highest share ever.
In fact, it’s down from Q1 2023’s share of 33.6%, though Redfin notes the decline follows a normal seasonal trend of new home shares peaking in the winter.
Though builders have slowed home construction, no longer producing the same inventory they did during the pandemic, the share of existing homes for sale is shrinking, leading to a natural increase in the share of newly built homes. Additionally, builders are struggling to sell homes they completed in the last few years, creating a backlog that’s adding to their portion of the pie.
“Builders are still building but homeowners aren’t selling, so new construction is the only option for many buyers. 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,” said Shauna Pendleton, a Redfin Premier agent in Boise, ID.
Many homebuilders cut prices and offer incentives to attract customers, including rate buydowns and paying closing costs. It is costly for homebuilders to keep unsold inventory on their books, so losing a little money on a sale is still preferable.
“One builder is doing a promotion where buyers get anywhere from $15,000 to $25,000 worth of concessions. It was supposed to end in June, but they extended it through July, and now they’re extending it through August. That money can cover all of a buyer’s appliances with money left over for a mortgage-rate buydown,” Pendleton noted.
Builders are starting to feel the effects of high interest rates. Builder confidence slipped in August, breaking a seven-month streak of increases, as high rates and shelter inflation put a dent in new home demand.
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