What happens when there’s a shortage of existing single-family homes?
Would-be homebuyers are turning to new-build homes as inventory of existing homes remains low.
Newly built homes made up nearly one-third of single-family homes on the market across the country in the second quarter of 2023, according to real estate website Redfin. That’s the highest share of any second quarter on record, with new construction keeping the housing market going.
Home buyers who are finding it hard to nab existing homes for sale are seeing new construction as a solution. While some new builds may be more expensive than existing homes, a report from NerdWallet shows that homebuilders are offering incentives to buyers.
According to the National Association of Home Builders, 57% of builders offered some kind of incentive in February of 2023. Incentives might include reduced prices, or lower interest rates.
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New homes make up a large share of housing inventory for a few reasons, Redfin reported. Builders tapped into pandemic homebuying, with record-low mortgage rates and remote work. Building permits for single-family U.S. homes soared in 2021 and early 2022.
The lack of existing homes on the market is another key issue. With mortgage rates now at almost a two-decade high, homeowners are hanging on to their low rates and staying put. There’s also leftover inventory due to higher mortgage rates. It has slowed homebuying overall, and builders haven't yet sold all the new homes they completed over the last few years.
New construction is more prevalent in the South where there are more new homes. New homes are most common in El Paso, Texas, Omaha, Nebraska and Raleigh, North Carolina, according to Redfin. They are least common in California and Hawaii. Newly built homes made up more than half of single-family homes for sale in El Paso.
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