32% of Homes for Sale in the Fourth Quarter Were Newly Built—Just Shy of the Record High

Rhea-AI Summary

Redfin reports that new construction has taken up a growing share of the for-sale housing market, with 31.8% of U.S. single-family homes for sale being new construction in the fourth quarter. This is comparable to 31.9% a year earlier, the highest level on record. The increase is attributed to rising homebuilding and decreasing number of individual homeowners selling due to rising mortgage rates. Builders are offering discounts and concessions, but also raising prices, leading to a significant increase in new single-family homes selling for $500,000 or more.

Insights

Market Research Analyst

The recent data indicating that new construction represents 31.8% of the U.S. single-family homes for sale in Q4 reflects a significant trend in the housing market. This stability, compared to the previous year's figure of 31.9%, suggests that the demand for new construction remains robust despite economic headwinds. The upward trajectory of homebuilding since 2009, coupled with the pandemic-induced surge, has reshaped the housing inventory landscape.

However, the reduction in homeowners listing their properties, largely due to increased mortgage rates leading to a 'lock-in effect,' is noteworthy. This indicates a potential shift in market dynamics where new constructions may be favored over existing homes, influencing homebuyer behavior and potentially affecting the resale market. The concessions offered by builders to attract buyers are a strategic response to this shift, which could lead to a more competitive market for new homes, with implications for pricing strategies and inventory management in the sector.

Financial Analyst

Analyzing the financial aspect of the increased share of new constructions in the housing market reveals several implications. The 'lock-in effect' due to rising mortgage rates has a dual impact: It reduces the supply of existing homes on the market and maintains demand for new constructions, which could support the revenues of homebuilding companies. The concessions offered by builders, while reducing profit margins, are a tactical move to maintain sales volume and manage inventory levels.

Moreover, the shift towards higher-priced new constructions, with 42% of new homes selling for $500,000 or more, indicates a potential increase in the average selling price (ASP) for homebuilders. This could result in higher revenue per unit sold but may also limit the market to higher-income buyers, potentially affecting the overall volume of sales in the long term. Investors should monitor how these pricing dynamics affect homebuilder stocks and the broader housing sector.

Economist

From an economic perspective, the current state of new construction sales provides insights into broader economic trends. The persistent demand for new homes, even with higher mortgage rates, suggests a resilient housing sector, which is a critical component of economic growth. However, this resilience is tempered by the fact that rising mortgage rates are causing many existing homeowners to refrain from selling, which could lead to reduced housing mobility and potentially stifle economic activity associated with home sales.

The increase in new home prices, particularly in the entry-level segment, raises concerns about affordability and the long-term sustainability of housing demand. As home prices outpace income growth, there may be downward pressure on demand, which could eventually lead to a correction in the housing market. The economic implications of these trends warrant close monitoring, as they could signal shifts in consumer spending, borrowing and investment behaviors within the broader economy.

Redfin reports 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

SEATTLE--(BUSINESS WIRE)-- (NASDAQ: RDFN) — Nationwide, 31.8% of U.S. single-family homes for sale in the fourth quarter were new construction, according to a new report from Redfin (redfin.com), the technology-powered real estate brokerage. That’s comparable with 31.9% a year earlier, which is the highest level of any fourth quarter on record.

Newly built homes are taking up a growing share of the for-sale housing pie for two primary reasons:

1. Homebuilding has increased. 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. Construction also jumped during the pandemic as builders responded to surging homebuyer demand fueled by record-low mortgage rates.
2. The number of homeowners putting their houses on the market has decreased over the last year and a half. That’s because mortgage rates started rising in 2022 and jumped to a 23-year high in 2023, prompting many homeowners to stay put instead of selling and losing the rock-bottom rate they scored during the pandemic. 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,” said Heather Mahmood-Corley, a Redfin Premier real estate agent in Phoenix. “I recently had a buyer who wasn’t interested in a new construction home, but the builder offered such a good rate–5.25%–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, MI.

“One of the builders in Grand Rapids that focuses on entry-level homes now has prices in the mid $300,000 range,” Kooiker said. “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.

To view the full report, including a chart, please visit: https://www.redfin.com/news/new-construction-q4-2023

About Redfin

Redfin (www.redfin.com) is a technology-powered real estate company. We help people find a place to live with brokerage, rentals, lending, title insurance, and renovations services. We also run the country's #1 real estate brokerage site. Our home-buying customers see homes first with same day tours, and our lending and title services help them close quickly. Customers selling a home in certain markets can have our renovations crew fix up their home to sell for top dollar. Our rentals business empowers millions nationwide to find apartments and houses for rent. Customers who buy and sell with Redfin pay a 1% listing fee, subject to minimums, less than half of what brokerages commonly charge. Since launching in 2006, we've saved customers more than $1.5 billion in commissions. We serve more than 100 markets across the U.S. and Canada and employ over 4,000 people.

For more information or to contact a local Redfin real estate agent, visit www.redfin.com. To learn about housing market trends and download data, visit the Redfin Data Center. To be added to Redfin's press release distribution list, email press@redfin.com. To view Redfin's press center, click here.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240201758248/en/

Redfin Journalist Services:

Ally Braun, 206-588-6863

press@redfin.com

Source: Redfin

FAQ

What percentage of U.S. single-family homes for sale in the fourth quarter were new construction?

31.8% of U.S. single-family homes for sale were new construction in the fourth quarter.

What are the primary reasons for the growing share of new construction in the for-sale housing market?

Homebuilding has increased since 2009 and surged during the pandemic in response to high homebuyer demand. The number of homeowners putting their houses on the market has decreased due to rising mortgage rates.

How have builders been attracting buyers to new construction homes?

Builders have been offering sizable concessions, including money for mortgage rate buydowns, to attract bidders and offload inventory.

How have prices of new construction homes changed recently?

Builders have boosted prices, with roughly two of every five new single-family homes selling for $500,000 or more in 2022, up from under one-third in 2021 and 18% in 2020.

Where can the full report be viewed?

The full report, including a chart, can be viewed at https://www.redfin.com/news/new-construction-q4-2023