Redfin Reports New Homes Make Up 28% of Third Quarter Sales, Marking Three-Year Low

November 4, 2024 TruthUSA

The supply of existing homes has increased over the past year, resulting in a smaller share of new properties.

The percentage of newly constructed homes among total homes sold in the third quarter declined in the United States, impacted by factors such as a slowdown in construction and a rise in the supply of existing houses, as reported by real estate brokerage Redfin.

Redfin stated in a press release on Nov. 1 that “Newly built homes accounted for 28 percent of single-family homes for sale nationwide in the third quarter, marking the lowest level in three years. This is down from 30.5 percent the previous year and a record-high of 34.4 percent at the beginning of 2022.”

According to Redfin, the decrease can be attributed to several factors, one of which is the increasing availability of existing inventory entering the market.

The total supply of existing single-family units has increased by 22 percent compared to the previous year, the report noted.

“This is partly due to the diminishing lock-in effect, where people are tired of waiting for mortgage rates to decrease before selling their home and looking for a new one,” Redfin explained.

Another contributing factor is that most of the available newly built properties have already been purchased by house hunters.

The sales of newly constructed single-family units increased by 6 percent year over year in September, according to the U.S. Census, partially due to builders providing buyers with incentives like cash towards closing costs and mortgage rate buydowns. Redfin mentioned that “these incentives have been effective, with many buyers turning to new construction for a better deal.”

Furthermore, there has been a slowdown in the construction of new properties. Permits for single-family unit construction were down by 23 percent from early 2021, when it reached a 15-year high.

Over the last four years, newly built homes have made up a significant portion of listed properties for sale because the supply of newly built homes increased substantially in 2022 and 2023, according to Redfin.

In contrast, the inventory of existing homes decreased over that period as mortgage rates rose and the lock-in effect took effect, according to the brokerage.

“The surge in newly built homes was a response to builders meeting high demand for home purchases due to low mortgage rates and remote work. While construction has slowed down, builders are still completing projects initiated in recent years,” the report stated.

During a press conference in February, Ali Wolf, chief economist with housing research group Zonda, forecasted that the new-home market would play a significant role this year, based on a Feb. 29 report from the National Association of Homebuilders.

Wolf highlighted Zonda’s research indicating that 40 percent of potential buyers were considering new homes to “avoid renovations or issues,” 25 percent were concerned about the lack of inventory of existing homes, and 25 percent sought the ability to choose and personalize their home’s design.

Housing Shortage, Political Issue

With elevated home prices and mortgage rates, the housing shortage is a critical concern in the United States and a major factor in the affordability crisis. A report by Zillow in June disclosed a shortage of 4.5 million homes in the United States in 2022.

“In 2022, the number of U.S. families grew by 1.8 million, while only 1.4 million housing units were constructed,” the report highlighted. “Those in markets with more stringent land-use regulations are less likely to afford the mortgage payment on a typical home.”

While the housing boom during the COVID-19 pandemic era triggered a construction surge, it has fallen short, according to the report.

Both Democratic and Republican presidential candidates have pledged to take actions to address the housing crisis.

Democratic presidential nominee Vice President Kamala Harris has committed to increasing housing supply by 3 million new units if elected. The plan includes “more substantial assistance” for first-time homeowners, potentially offering $25,000 in downpayment aid to first-time buyers, as outlined on her campaign website.

Harris aims to streamline the construction process to accelerate homebuilding and plans to enact legislation prohibiting new price-fixing measures by corporate landlords.

“There is a severe housing shortage in many areas. Building is too difficult, leading to rising prices,” Harris expressed during a rally in August. “I will collaborate with the industry to construct the necessary housing, both for rent and purchase. We will eliminate barriers and reduce red tape at the state and local levels.”

On the other hand, Republican presidential nominee former President Donald Trump’s campaign website states that he has plans to reduce inflation to lower mortgage rates to a more affordable level for buyers.

Trump also intends to allocate limited portions of federal lands for new home construction and eliminate unnecessary regulations that increase housing costs.

In a speech at the Economic Club of New York in September, Trump mentioned that “regulations cost 30 percent of a new home.”

He elaborated that federal lands earmarked for extensive housing construction will have minimal taxes and regulations, creating a significant small business job creation program.

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