Twenty-nine percent of U.S. single-family homes for sale in the third quarter were new construction, the highest share of any third quarter on record, according to a new report from Redfin, the tech-focused real estate brokerage. This represents an increase from 25% in the third quarter of 2021 and 18% in the third quarter of 2020.
New home construction has taken a growing share of overall housing supply since 2011, when construction began to rebound from the financial crisis. The trend is now intensifying due to a surge in construction during the pandemic and a recent slowdown in the number of existing homeowners putting their homes up for sale. Single-family housing starts rose 14% year-over-year in 2021, the largest annual increase since 2013. As a result, more single-family housing units were completed in the third quarter than any quarter. since 2007. In September alone, the number of new homes completed for sale increased by 19% compared to the previous month.
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“Homebuilders launched dozens of projects during the pandemic moving frenzy and are now stuck with a bunch of new homes that are hard to sell as mortgage rates have risen to 7%,” said Faith Floyd, an agent Redfin real estate in Houston. “Builders are giving away everything but the kitchen sink to attract bidders. Many offer to lower the buyer’s mortgage rate by 1.5 points, and I’ve seen at least one offer a check for $10,000 for closing costs, a $3,000 gift card, and a refrigerator. free. One-way builders will pull themselves out of the hole they’re in.
Floyd continued, “Many builders offer more incentives than regular sellers. Many individual sellers are still pricing their homes too high because they are struggling to accept that the pandemic housing boom is over and they won’t get 30 offers like their neighbor did last year. .
Builders are also dangling incentives in front of real estate agents. Floyd said some are offering agents a 5% commission, up from 0% during the pandemic and the typical 3% pre-pandemic, in addition to $6,000 bonuses.
With a glut of inventory, builders are likely to scale back construction in 2023, according to Redfin deputy chief economist Taylor Marr.
“Homebuilders will take on fewer new projects next year as they focus on selling their existing projects,” Marr said. “Builders will also shift more towards multi-family housing, for which demand is still relatively high as rents remain high.”
Pandemic boom towns have high share of new home construction
Many metro areas with relatively high shares of new homes for sale have something in common: They accelerated construction during the pandemic because they exploded in popularity with out-of-town buyers, and are now experiencing significant downturns in their housing markets. More than half of the top 20 metros are in Texas or Florida, hot pandemic migration destinations with room to build. More than a quarter of the top 20 are now on Redfin’s list of fastest-cooling housing markets.
In El Paso, Texas, newly built single-family homes accounted for half of all homes for sale in the third quarter — the highest share among the 80 major metropolises with enough data analyzed by Redfin. This is followed by Oklahoma City (43%), Omaha, NE (40%), Raleigh, NC (39%) and Houston (37%). Rounding out the top 10 are North Port-Sarasota, FL (35%), San Antonio (33%), Greenville, SC (33%), Boise, ID (33%) and Charleston, SC (32%).
Southwest Florida’s metro North Port has consistently been a top migration destination during the pandemic because it offers relative price and sunshine. This caused a spike in house and construction prices. Building permits in North Port soared 68% year-over-year in 2021, while house prices rose 21%. Because it has warmed up so much during the pandemic, it is now one of the fastest cooling markets. This forces many existing homeowners to delay listing, resulting in newly built home listings taking an even larger share of the market.
It should be noted that North Port was hit hard by Hurricane Ian in late September and has since seen a sharp decline in sales and new listings as a result, which has intensified the market downturn.
This dataset referenced in this press release is seasonal, which is why Redfin compares the third quarter of 2022 to previous third quarters. The share typically hits an annual high in the first quarter and a low in the second or third quarter. The highest share of any quarter on record was 34% in the first quarter of 2021.
To view the full report, including graphs and a metropolitan-level summary, please visit: https://www.redfin.com/news/new-construction-q3-2022/