Homebuyers are turning to newly built single-family homes as overall inventory sits at an all-time low. New homes are most common in El Paso, TX, Omaha, NE and Raleigh, NC, and least common in California and Hawaii.
Newly built homes made up nearly one-third (31.4%) of U.S. single-family homes on the market in the second quarter. 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 of all inventory is up from 30.3% a year earlier and nearly double the pre-pandemic share of about 17% in the second quarter of 2019.
The second quarter’s share is down from a near-record-high of 33.6% the previous quarter, but that’s a normal seasonal pattern, as the share of new homes tends to peak in the winter months.
New homes make up a near-record share of housing inventory for a few reasons:
With inventory at a record low, 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.
“Builders are still building but homeowners aren’t selling, so new construction is the only option for many buyers,” said Shauna Pendleton, a Redfin Premier agent in Boise, ID, where new homes made up nearly 40% 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. 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.”
Boise is one example of the role of newly built homes in today’s housing market. New homes made up 38% of single-family homes for sale in Boise in the second quarter, the fourth-highest share in the country. But that’s down from almost half (49%) a year earlier, the biggest decline in the country.
The Idaho capital experienced a residential building boom in 2021 and early 2022 as builders worked to keep up with rampant pandemic-driven demand, with out-of-town remote workers flooding into Boise, attracted to its relatively low cost of living and outdoorsy lifestyle. There were so many new homes on the market that nearly half of last summer’s single-family inventory was new construction.
Boise’s housing market has cooled considerably due to elevated mortgage rates and the end of the remote-work migration boom, but builders are still constructing a lot of new homes, according to Pendleton. Even though they make up a smaller portion of for-sale single-family inventory than they did a year ago, the share is still significant because 1) builders are still building and they’re offloading excess inventory, and 2) there’s a serious lack of existing homes for sale, with Boise’s total inventory down 51% year over year in June.
