Twenty-nine percent of single-family homes for sale in the third quarter were new construction, the highest share of any third quarter on record, according to Redfin. That’s up from 25 percent in the third quarter of 2021 and 18 percent in the third quarter of 2020.
Newly-built homes have been taking up a growing portion of overall housing supply since 2011, when building started to rebound after the financial crisis. According to Redfin, the trend is intensifying due to a surge in construction during the pandemic and a recent slowdown in existing homeowners putting their houses up for sale.
Single-family housing starts rose 14 percent year-over-year in 2021, the largest annual increase since 2013. As a result, more single-family homes were completed in the third quarter than any quarter since 2007. In September alone, the number of completed new homes for sale was up 19 percent from August.
“Homebuilders started scores of projects during the pandemic moving frenzy and are now stuck with a bunch of new houses that are hard to sell because mortgage rates have risen to 7 percent,” Houston Redfin real estate agent Faith Floyd said in a release. “Builders are giving away everything but the kitchen sink to attract bidders. Many are offering to buy down the buyer’s mortgage rate by 1.5 points, and I’ve seen at least one offer a $10,000 check for closing costs, a $3,000 gift card and a free fridge. This is one way builders will dig themselves out of the hole they’re in.
“Many builders are offering more incentives than regular sellers. A lot of individual sellers are still pricing their homes too high because they’re having a hard time accepting that the pandemic housing boom is over and they’re not going to get 30 offers like their neighbor did last year.”
Builders also are dangling incentives in front of real estate agents. Floyd said some are offering agents a 5 percent commission, up from 0 percent during the pandemic and the typical 3 percent before the pandemic, in addition to bonuses of $6,000.
With a glut of inventory on their hands, builders will likely ease up on construction in 2023, according to Redfin Deputy Chief Economist Taylor Marr.
“Homebuilders will take on fewer new projects next year as they focus on getting their existing projects sold,” Marr said. “Builders will also shift more toward multifamily units, for which there is still relatively high demand because rents remain high.”
In El Paso, Texas, newly built single-family homes made up half of all homes for sale in the third quarter, the highest share among the major metros Redfin analyzed. Next came Oklahoma City (43 percent), Omaha, Neb. (40 percent), Raleigh, N.C. (39 percent), Houston (37 percent), North Port-Sarasota, Fla. (35 percent), San Antonio (33 percent), Greenville, S.C. (33 percent), Boise, Idaho (33 percent) and Charleston, S.C. (32 percent).