New construction took a growing piece of the housing-inventory pie as scores of new homes go up for sale and homeowners hold off listing during a market slowdown.
SEATTLE – In the third quarter (3Q) of 2022, 29% of U.S. single-family homes were new homes rather than existing homes. It’s the highest share of any third quarter on record, according to a report from Redfin. It’s up from 25% one year earlier and 18% two years earlier.
Newly-built homes have been taking up a growing portion of overall housing supply since 2011, when building started to rebound after the financial crisis. The trend is now intensifying due to a surge in construction during the pandemic and a slowdown in the number of existing homeowners listing their property 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 homes were completed in 3Q than any quarter since 2007. In September alone, the number of completed new homes for sale was up 19% month-to-month.
“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%,” says Faith Floyd, a Redfin real estate agent 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.”
Builders are also dangling incentives in front of real estate agents. Floyd said some are offering agents a higher commission that’s up from 0% during the pandemic and higher than commissions offered before the pandemic. Some also offer bonuses.
With a glut of inventory on their hands, builders will likely ease up on construction in 2023, according to Redfin Deputy Chief Economist Taylor Marr.
“Homebuilders will take on fewer new projects next year as they focus on getting their existing projects sold,” Marr says. “Builders will also shift more toward multifamily units, for which there is still relatively high demand because rents remain high.”
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