Only A Small Share of For-Sale Homes Are New-Construction
Despite a recent surge in new-home inventory, newly built homes make up just a small percentage of homes for sale. According to a recent report from real estate marketing platform Redfin, as of most recent August data, only 26.8% of single-family homes for sale nationwide were new homes. That figure is down from 28.2% a year earlier and down from 30.6% two years ago.
That said, new homes still make up a sizable share of the single-family supply than they did prior to the COVID-19 pandemic. As homebuying demand grew over the years following 2020, the share of new-home inventory also grew. Between 2018 and 2019, the share of new homes sat between 15% and 20% and grew to nearly 35% by 2022. Since then, it has slowly come down.
Rather than a lack of new homes, it’s the growth in the existing-home inventory that’s keeping the share of new homes low
In 2022 and 2023, there were less existing-home listings because many homeowners were holding on to their properties due to very low mortgage rates. However, as the lock-in effect fades, more people are putting their homes up for sale. Changing life situations and hopes that buyers will take advantage of slightly lower mortgage rates are also driving more listings.
Additionally, homes are taking longer to sell, causing existing homes to sit on the market for longer. Currently, the median time on the market is 50 days, which is the longest for September since 2016.
To compete with the resale market, builders are offering incentives
Even with a greater number of existing homes for sale, builders are doing their best to draw buyers to the new-home market. Many builders are offering incentives, including mortgage-rate buydowns or paying for closing costs.
In addition to incentives, new homes have become more affordable than existing ones
- New-Home Affordability Improves: A recent report shows that the typical new home in the U.S. costs $218.66 per square foot compared with $226.56 for the typical existing home.
- New Homes Are Now Nearly $20K Cheaper Than Existing Homes: As of July, new homes were on average $20,000 cheaper than homes in the resale market.