Newly Built Homes Make Up Only 28% of Listings, Hitting a 3-Year Low, Redfin Reports

According to a Redfin report, newly built homes accounted for 28% of the single-family homes for sale nationwide in the third quarter, marking their smallest share in three years.

It's a decline from 30.5% during the same period in 2023 and a peak of 34.4% at the start of 2022.

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The decline stems from several factors:

• More existing homes on the market: Existing inventory has surged by 22% year over year, likely because sellers feel less pressure to wait for lower mortgage rates before listing their homes.
• Strong demand for new construction: Sales of new homes have risen 6.3% year over year, partly driven by builder incentives such as mortgage rate buydowns and closing cost assistance. Redfin agents report that the incentives are attracting buyers seeking good deals on new construction.
• Slower pace of new construction: Homebuilders, facing higher mortgage rates that dampen demand, focus on selling existing inventory instead of ramping up construction. The slowdown is evident in a 2% year-over-year drop in single-family homebuilding permits, down 23% from a 15-year high in early 2021.

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The shift suggests a changing market dynamic. While new construction remains a viable option, potential buyers may find a wider selection of existing homes alongside enticing new builds.

Over the past four years, newly built homes have constituted a significant portion of the housing inventory due to a surge in construction in 2022 and 2023, while the supply of existing homes declined.

The shift occurred as rising mortgage rates triggered the "lock-in effect," discouraging homeowners from selling. Meanwhile, builders ramped up construction in response to strong demand fueled by ultralow mortgage rates and the remote work boom.

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Although construction has slowed, builders continue to complete previously initiated projects. The share of new homes in the housing inventory may decrease slightly as building permits decline. However, it is expected to remain above pre-pandemic levels, as persistently high mortgage rates will likely limit the supply of existing homes hitting the market.

Mortgage rates rose on Nov. 17, with the average 30-year fixed mortgage rate increasing by 10 basis points to 6.64% – the highest since early June, according to Zillow.

Recent increases in the 10-year Treasury yield, driven by market reactions to President-Elect Donald Trump's proposed policies, have led to higher mortgage rates. This trend is expected to continue in the near future.

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