The pool of houses for sale is now back “well above” pre-pandemic levels as more owners put their places on the market. But with many over-extended builders pulling back, the number of new houses for sale is slowing dwindling.
According to a new report from Redfin, newly built houses accounted for about 27% of the total number of single-family houses for sale in August. That’s the lowest level in four years. (August is the most recent month for which data is available, Redfin noted.)
Other indications that builders are pulling in their horns: Housing starts fell 6% year-over-year in August, according to the Census Bureau, and completions dipped 8.4%.
“After construction surged during the pandemic to meet home buying demand, some builders are opting against starting new projects because they’re still trying to offload inventory that’s already completed,” Redfin said.
According to one report, builders are holding more than 150,000 completed but unsold houses nationally. Still, Redfin says newly built houses account are for a smaller share of the inventory mainly because the supply of existing homes has rebounded.
In October, 1.1 million properties were listed for sale, the most since 2019, according to Realtor.com.
To offload their unsold inventory, many builders are offering a wide range of incentives, everything from steep price cuts and mortgage-rate buy downs to paying a buyer’s closing costs and tossing in upgraded appliances.
In one case, the builder of a golf course community in Florida threw in a golf cart. And that’s in addition to a price discount of some $100,000, cheaper loan rates and free furnishings.
Incentives are particularly prevalent in Texas, Utah and Florida, Redfin says.
“Builders are desperate to sell,” said Roze Swartz, a Redfin agent in Houston. “Prices are lower than usual, insurance costs are lower than for existing homes, and buyers have the power because there’s more supply than demand.”
Another Redfin agent, Jesse Landin in San Antonio, said builders are now reluctant to start new projects because they no longer make financial sense. “The market is over-saturated with new construction, so much so that some local builders are laying off workers,” he said.
That, Landin noted, is “something I’ve never heard of happening before.”
