Newly built homes made up nearly one-third (31.4 percent) of single-family homes on the market nationwide in the second quarter, according to a new report from Redfin.
That’s the highest share of any second quarter on record, with new construction keeping the housing market afloat amid the severe shortage of existing homes for sale.
The portion of new homes is up from 30.3 percent a year earlier and nearly double the pre-pandemic share of about 17 percent in the second quarter of 2019.
The second quarter’s share is down from a near-record high of 33.6 percent the previous quarter, but that’s a normal seasonal pattern, as the share of new homes tends to peak in the winter months.
“Builders are still building but homeowners aren’t selling, so new construction is the only option for many buyers,” Shauna Pendleton, a Redfin agent in Boise, Idaho, said in a release. In Boise, new homes made up nearly 40 percent of single-family inventory in the second quarter.
“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,” Pendleton said. “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.”
Redfin said new homes make up a near-record share of housing inventory for a few reasons:
• The pandemic-fueled homebuilding boom. Builders rushed to capitalize on the pandemic homebuying frenzy in 2021 and early 2022, driven by record-low mortgage rates and remote work.
• Lack of existing homes on the market. Builders aren’t constructing as many new single-family homes as they were at the height of the pandemic, but so few homeowners are putting their homes on the market that new homes still make up a huge share of available inventory. Total inventory dropped 15 percent year-over=year to an all-time low in June.
• Leftover inventory. Because elevated mortgage rates have slowed homebuying demand, builders haven’t yet offloaded all the new homes they’ve completed. Although buyers have made a dent in the glut of new-construction homes on the market over the last several months, there are still plenty of new homes on the market. The number of newly built single-family homes for sale was up 4.5 percent year-over-year in June, compared with an 18 percent drop for existing homes.
With inventory at a record low, Redfin said many buyers are turning to new construction. But because overall demand is still relatively low, with high rates continuing to sideline many would-be homebuyers, some builders are lowering prices and offering perks to offload excess inventory.
For many homebuyers, new construction is a welcome option in today’s market – especially in the southern part of the country, where new homes tend to be more prevalent. That’s partly because new homes are often easier to find and partly because builders are more likely than individual homeowners to offer concessions; builders typically don’t have the option of pulling a home off the market if they’re unable to get the price they want, according to Redfin.