Supply Squeeze: Homeowners Hold Back, Propelling Share Of Newly Built Homes For Sale To Near-Record High

With fewer homeowners putting their houses on the market, the share of newly built homes for sale across the country reached near-record highs in the fourth quarter.

New homes accounted for 31.8% of single-family homes for sale, according to a report from Redfin. That's just shy of a year ago when 31.9% of homes for sale were new construction — the highest level of any fourth quarter on record. The record for any quarter was 34.5% set in the first quarter of 2022.

Existing home listings have declined since mortgage rates started rising in 2022, jumping to a 23-year high last year and prompting many homeowners to stay where they are rather than lose the low interest rates they secured during the pandemic.

At the same time, homebuilding has increased as builders recover from the Great Recession. Homebuilders also are offering concessions to attract bidders and unload inventory. Mortgage rate buydowns are the No. 1 incentives builders are offering. Other incentives include help with closing costs and price cuts.

"Newly built homes are selling quickly right now because builders are offering such good discounts," said Heather Mahmood-Corley, a Redfin Premier agent in Phoenix. "I recently had a buyer who wasn't interested in a new construction home, but the builder offered such a good rate — 5.25% — that they couldn't afford not to take it. Another one of my buyers got a $10,000 credit for closing costs from a builder."

While builders are offering incentives, they also are increasing prices, said Christine Kooiker, a Redfin Premier agent in Grand Rapids, Michigan.

"One of the builders in Grand Rapids that focuses on entry-level homes now has prices in the mid $300,000 range," she said. "Not long ago, buyers could get a new construction home here for $250,000 or $300,000."

About 42% of new single-family homes that sold in 2022 went for $500,000 or more, up from 30% in 2021 and 18% in 2020.

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