Newly constructed homes are not selling like they did a few years ago. Housing analysts attribute this to the fact that home building has slowed, and buyers struggling with affordability have bought up much of the existing inventory and newly built homes.
Newly built homes made up 28% of single-family homes for sale nationwide in the third quarter, the lowest level in three years, according to a new report from Redfin. That’s down from 30.5% in third quarter 2023 and a record-high of 34.4% at the start of 2022.
Meanwhile, the total supply of existing single-family inventory is up 22% year over year.
Sales of newly built single-family homes rose 6.3% year over year in September 2024, according to U.S. Census data, while pending home sales rose 3.5% year over year during the four weeks ending October 20, marking the second-largest increase in three years.
However, homebuilders have backed off since the pandemic-driven building boom, with high mortgage rates dampening demand. The Federal Reserve's decision in September to slash its benchmark borrowing rate by 50 basis points has improved new-home sales forecasts for 2025.
Permits to build single-family homes were down 2% year over year in September, and down 23% from the 15-year high they hit in early 2021.
Despite the fact that home builders are stepping back now, the homes they built over the past few years during the pandemic buying boom still make up a large portion of for-sale inventory. Builders’ share increased from roughly 17% in 2019 to nearly 30% by the end of 2021.
Since then, mortgage rates rose and lock-in effects have kept existing-home inventory, and buyers, off the market.
The National Association of Home Builders’ (NAHB)/Wells Fargo Housing Market Index (HMI) for October indicated that builder confidence in the market for newly-built single-family homes was up two points from September.
