New Builds Make Up One-Third of Inventory

Almost a full third (31.4%) of single-family homes on the market are now new builds. 

Just a year ago, new construction accounted for 30.3% of single-family inventory. And in the second quarter of 2019, that figure was 16.7%. 

A new Redfin report for the second quarter of 2022 shows the growth of new builds as a share of available inventory, reaching the highest percentage on record for a second quarter. 

That 31.4% is down from the previous quarter’s near-record high of 33.6% (as well as from last year’s Q1 share of 34.5%) as the share of new builds typically peaks in the winter months.

As overall inventory remains at a record low, more homebuyers are turning to newly built homes, especially in areas where new construction is most common: 

1. El Paso, TX (where new builds account for 52% of single-family homes for sale)
2. Omaha, NE (46%)
3. Raleigh, NC (42.1%)
4. Oklahoma City (39%)
5. Boise (38%)

It’s least common in these five metros:

1. Honolulu, HI (2.8%)
2. San Diego (3.3%)
3. Pittsburgh, PA (3.3%)
4. Oxnard, CA (3.7%)
5. Detroit (3.8%)

New construction accounts for a near-record share of for-sale inventory

We can point to three primary reasons why new builds now represent a near-record share of total inventory. 

1. Builders rushed to capitalize on the pandemic-fueled home buying frenzy, which ramped up building permits for single-family construction in 2021 and early 2022. 
2. Total inventory fell 15% year over year in June, falling to an all-time low. New listings have dropped so much, thanks to the lock-in effect, that even with the overall slowdown in construction (compared to pandemic-fueled building rates), new builds account for a larger share of for-sale inventory.
3. Builders have leftover inventory, thanks to the slowdown in buyer demand. And while buyers have made a dent in that supply, the number of new builds for sale in June was up 4.5% year over year—compared to an 18% decline for existing homes.

Builders see the decline in new listings as an opportunity

With today’s mortgage rates near a two-decade high, builders are seeing the decline of new listings as an opportunity to fill the gap. 

In today’s market, many buyers see new construction as an attractive option—especially in southern states where new homes are (generally) more prevalent. 

For one, they’re often easier to find. For another, builders are more likely than homeowners to lower prices and offer concessions. Unlike individual sellers, builders don’t have the option of taking a home off the market if they can’t get the price they want. 

Builders are still building but homeowners aren’t selling, so new construction is the only option for many buyers. A lot of buyers want to secure a home now because they’re worried prices are going to go back up, and new construction is more plentiful with perks that are hard to pass up. One builder is doing a promotion where buyers get anywhere from $15,000 to $25,000 worth of concessions. It was supposed to end in June, but they extended it through July, and now they’re extending it through August. That money can cover all of a buyer’s appliances with money left over for a mortgage-rate buydown.

Shauna Pendleton

a Redfin Premier agent in Boise, ID

New construction has declined most in Boise but still accounts for 38% of single-family homes

Boise is a standout example of the role of newly constructed single-family homes in the current housing market. New builds accounted for 38.3% of single-family homes on the market in the second quarter of this year—the fifth highest in the U.S. 

But that’s a steep drop from 49% in Q2 2022, marking the biggest year-over-year decline in the U.S., followed by— 

• Austin, TX (30.4%, down from 34.5%), 
• Honolulu (2.8%, down from 6.4%), 
• Allentown, PA (14.9%, down from 18.5%) and 
• Houston (35.3%, down from 38.5%)

In 2021 and early 2022, Boise experienced a residential building boom as builders worked to meet the pandemic-driven buyer demand, largely due to a massive influx of remote workers looking for relatively affordable homes and better access to nature. 

So many new homes hit the market that nearly half of the metro’s supply of single-family homes were new builds.

Since then, Boise’s market has cooled, thanks to mortgage rates that soared in the second quarter of 2022 and have remained elevated since—as well as a significant drop in remote worker migration. 

Despite the drop, new builds still make up a significant portion of for-sale homes, mainly because— 

1. Builders are still working on new construction—and are offloading excess inventory
2. Boise, like other metros across the country, still has a severe shortage of existing homes for sale; total inventory for the metro was down 51% year over year in June. 

Read the full report for more details. 

Takeaways for real estate agents

Whatever the share of total inventory new builds account for in your market, your clients will want to know not only what’s currently available but what homes are likely to come on the market in the coming months. 

Get familiar with local builders and any new developments they have in the works so you can pass on that information to your clients and prospects. 

A collaborative relationship between you and trustworthy builders in your area can make homeownership more attainable for motivated buyers, especially if the builders are prepared to lower prices and offer concessions to make those new homes more affordable.