One of Every 3 Active Listings in U.S. is New Construction
Nearly one-third of single-family homes on the market during the second quarter of this year (2023) were newly built, according to an analysis by Redfin. Researchers said that is the highest share of any second quarter on record.
A review of Northwest Multiple Listing Service data for July indicates a smaller portion, about 18%, of single-family homes in its inventory are new construction. Factoring in condominiums, the percentage rises slightly, to about 18.2%.
A comparison of the 26 counties in the MLS service area shows wide variation in the share of newly built homes within each area’s active listings. Kitsap County claims the highest percent, at nearly 34%.
Redfin’s researchers cite three reasons for the near-record share of new homes that make up the country’s housing inventory:
Homebuilding boom fueled by the pandemic. Building permits for single-family homes soared in 2021 and early 2022 as “builders rushed to capitalize on the pandemic homebuying frenzy, driven by record-low mortgage rates and remote work.”
Sparse supply of existing homes on the market. Even though builders are not constructing as many new single-family homes as they were during the height of the pandemic, very few homeowners are listing their homes so new homes still make up a large share of available inventory. Year-over-year inventory declined 15% to an all-time low in June, while mortgage rates approached a two-decade high. Homeowners are reluctant to surrender their low rates. “Builders don’t experience that same lock-in effect,” Redfin noted.
Leftover inventory. Elevated mortgage rates have slowed homebuying demand. Consequently, builders have not yet offloaded all the homes they’ve completed during the past few years. As of June, the number of newly built single-family homes for sale rose 4.5% year-over-year, while the supply of existing homes dropped 18%.
Redfin’s comparison of metro areas revealed newly-built homes are most prevalent in El Paso, Texas, where they make up more than half (52%) of single-family homes for sale. That area is followed by Omaha, Nebraska, with 46%, Raleigh, North Carolina (41.1%), Oklahoma City (39%) and Boise, Idaho (38%). The brokerage noted “New construction is typically prevalent in parts of the country with sprawling land and loose building codes.”
By contrast, Redfin reported new construction is relatively uncommon in California because of limited land and strict regulations. Two metros in that state were among areas where new construction is least prevalent: San Diego, with only 3.3% of its inventory classified as new construction, and Oxnard (3.7%). The smallest share of metros in the analysis was Honolulu (2.8%). Pittsburgh (3.3%) and Detroit (3.8%) were also mentioned.
In Washington state, King County had the highest portion of new homes built - 2,293 total active listings and 514 new construction (22.42%).