A whopping 29% 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. That’s up from 25% in the third quarter of 2021 and 18% in the third quarter of 2020.
According to Redfin, newly-built homes have been taking up a growing portion of the housing supply post-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 recent slowdown in existing homeowners putting their houses up for sale.
Single-family housing starts rose 14% compared to 2021, which marked the largest annual increase since 2013. More single-family homes were completed in the third quarter than in any quarter since 2007. In September alone, the number of completed new homes for sale was up 19% from the prior 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%,” said 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. This is one way builders will dig themselves out of the hole they’re in.”
Floyd continued: “Many builders are offering more incentives than regular sellers. 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.”
As inventory begins to rebound, 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 said. “Builders will also shift more toward multifamily units, for which there is still relatively high demand because rents remain high.”
Where are these new homes?
Many of the metro areas with high shares of new homes for sale all ramped up building during the pandemic because they exploded in popularity with out-of-town buyers. Now, these same metros are seeing significant slowdowns in their housing markets. More than half of the metros in the top 20 are in Texas or Florida, which were hot pandemic migration destinations.
In El Paso, Texas, newly built single-family homes made up half of all homes for sale in the third quarter—the highest share among the 80 major metros with sufficient data that Redfin’s report covered.
