A new Redfin report revealed that 29% of single-family homes for sale in the third quarter were new construction — a record high.
That share is up from 25% in the third quarter of last year and up from 18% in third-quarter 2020. Newly built homes as a portion of the overall housing supply have been on the rise since 2011, when residential construction began its post-housing crisis recovery, Redfin noted. This growth has amplified of late due to a swell of homebuilding activity during the pandemic: Single-family starts grew 14% annually in 2021, leading to more home completions in Q3 2022 than in any other quarter since 2007.
And the numbers of newly completed homes for sale are seeing large increases on a monthly basis, like in September, when the nationwide figure vaulted 19% from August.
“Homebuilders started scores of projects during the pandemic moving frenzy and are now stuck with a bunch of new houses that are hard to sell because mortgage rates have risen to 7%,” said Faith Floyd, a Redfin agent based in Houston. “Builders are giving away everything but the kitchen sink to attract bidders.
“Many are offering to buy down the buyer’s mortgage rate by 1.5 points, and I’ve seen at least one offer a $10,000 check for closing costs, a $3,000 gift card and a free fridge. This [is] one way builders will dig themselves out of the hole they’re in.”
Motivated builders are looking to offload newly constructed homes by offering incentives for buyers and real estate agents alike. According to Floyd, some builders are offering agent bonuses of about $6,000, plus a 5% commission — up from 3% pre-pandemic and 0% during the housing boom. Builders, she added, have been more in touch with the market than homeowners and have been quick to entice buyers in order to move inventory.
“Many builders are offering more incentives than regular sellers,” Floyd said. “A lot of individual sellers are still pricing their homes too high because they’re having a hard time accepting that the pandemic housing boom is over and they’re not going to get 30 offers like their neighbor did last year.”