New homes for sale continued to represent about a third of all homes for sale in the fourth quarter, according to a report from Redfin.
That’s comparable with 31.9% a year earlier, which is the highest level of any fourth quarter on record.
New construction has taken up a growing share of the for-sale housing pie because homebuilding has increased and the number of individual homeowners selling has decreased, Redfin says.
Homebuilding has been on an upward trajectory since 2009 as builders have slowly climbed their way out of the hole caused by the Great Recession, the firm says in its report.
Construction also jumped during the pandemic as builders responded to surging homebuyer demand fueled by record-low mortgage rates.
Meanwhile, existing-homes for sale have dried up, as most homeowners are now “locked-in” to their current low-rate mortgages, and thus have a financial disincentive to move.
While mortgage rates have fallen a bit in the last few months, this “lock-in effect” continues to hamper listings, which are higher than they were a year ago but remain far below pre-pandemic levels.
Homebuilders have been offering sizable concessions, including money for mortgage rate buydowns, to attract bidders and offload inventory. That has made it hard for some individual sellers of existing homes to compete for buyers.
“Newly built homes are selling quickly right now because builders are offering such good discounts,” says Heather Mahmood-Corley, a Redfin Premier real estate agent in Phoenix, in the report. “I recently had a buyer who wasn’t interested in a new construction home, but the builder offered such a good rate – 5.25 percent – that they couldn’t afford not to take it. Another one of my buyers got a $10,000 credit for closing costs from a builder.”
While builders are offering discounts, they’ve also boosted prices, according to Christine Kooiker, a Redfin Premier real estate agent in Grand Rapids, Mich.
“One of the builders in Grand Rapids that focuses on entry-level homes now has prices in the mid $300,000 range,” Kooiker says. “Not long ago, buyers could get a new construction home here for $250,000 or $300,000.”
Roughly two of every five (42%) new single-family homes that sold in 2022 went for $500,000 or more, up from under one-third (30%) in 2021 and 18% in 2020.
Photo: Todd Kent
