Newly constructed homes accounted for 28% of single-family homes for sale nationwide in the third quarter 2024, the lowest level in three years, according to a new report from Redfin.
The tech-focused real estate brokerage reports that new construction accounted for 30.5% of total inventory a year earlier and a record-high of 34.4% at the start of 2022. New homes have been making up a smaller portion of total inventory during the past two years for various reasons, including builders reducing the number of new homes under construction and more homeowners listing their existing houses for sale.
The total supply of existing single-family inventory rose 22% year over year, per Redfin. The reasons include the fading power of the “lock-in” effect, which is when homeowners are unwilling to sell their homes and give up their low mortgage interest rate. It appears a growing number of homeowners are tired of waiting for mortgage rates to come down and are going ahead and placing their existing homes on the market.
At the same time builders were offering buydowns, cash toward closing and other enticements. The result has been that more buyers are finding new construction a better deal. New home sales are up 6.3% year-over-year in September.
Another reason for the inventory reduction is that homebuilders have slowed the rate of construction since the pandemic building boom came to an end with higher interest rates slowing demand. Construction companies are now focused on selling their existing inventory before starting new homes. Redfin reports that September permits for the construction of single-family homes were down 2% year over year, and down a surprising 23% from early 2021, when home construction reached a 15-year high.
Despite these findings, new homes still make up a higher portion of the U.S. housing inventory than before the pandemic. The percentage of new homes for sale rose from about 17% of housing inventory in 2019 to nearly 30% by the end of 2021, writes Redfin. In 2022 and 2023, the number of newly constructed homes soared as the supply of existing homes on the market fell.
Going forward, Redfin expects new homes to make up a smaller portion of the housing inventory as permitting slows. But the new home share should remain above pre-pandemic levels.
