The market share of new homes jumped to record levels last quarter as mortgage rates jumped to a 22-year high, according to real estate brokerage Redfin, forcing builders to sell homes with strong incentives and at lower prices. low in an attempt to attract potential buyers. buyers
A record 29% of single-family homes for sale in the third quarter were new construction, up from 25% in the same period last year and 18% in 2020, thanks in part to the increased number of new homes that finished the construction and entered the market since 2007, Redfin reported Tuesday.
Newly built homes have made up a growing portion of the total housing supply since 2011, when construction began to pick up after the financial crisis, but Redfin notes that the trend is now “intensifying” due to an increase in construction. during the pandemic and a recent slowdown in existing homeowners putting their homes up for sale.
In a statement, Redfin agent Faith Floyd said homebuilders who started “dozens of projects” during the pandemic-era homebuying frenzy are now “stuck with a bunch of new homes that are hard to sell” because mortgage rates have risen to 7%. , raising the cost of new mortgages by an average of $800 per month, according to Zillow.
As demand falls, the impact has been hardest in pandemic “thriving cities,” or areas that saw increased demand for home purchases during the pandemic but have now been hit hardest by shortages. of potential buyers, according to Redfin, which points to the highest percentages of new buyers. homes for sale are in markets like El Paso, Texas; Oklahoma City; Omaha, Nebraska; Raleigh, North Carolina; and Houston.
For buyers, that has meant offering a host of incentives to entice bidders, with many builders lowering the buyer’s mortgage rate by 1.5 percentage points on top of paying closing costs and offering free appliances, Floyd says.
Meanwhile, builders are likely to build fewer homes next year as they are forced to lower prices to help boost demand, according to some experts. predicting New home prices in former pandemic hotspots could fall as much as 20% early next year.
“Builders are giving away everything but the kitchen sink to attract bidders. . . I’ve seen at least one offer of a $10,000 check for closing costs, a $3,000 gift card and a free refrigerator,” says Floyd. “This is a way for builders to get out of the hole they’re in.”
Despite the raft of incentives homebuilders are starting to offer buyers, many experts say it may not be smart to buy a home until rates come down. “It’s the worst time to buy a house in a long time,” Columbia real estate professor Christopher Mayer said recently. saying Market. The Mortgage Bankers Association Projects rates will drop to around 5.5% by the end of this year.
Soaring inflation has forced central banks around the world to reverse pandemic-era policy measures intended to boost markets, and the Federal Reserve’s rate hikes this year have hit the market particularly hard. real estate that was previously booming. New home sales fell to a six-year low this summer as mortgage rates rose to a 22-year high and mortgage applications plummeted. suggest the collapse will only get worse. Research firm Pantheon Macroeconomists projects that monthly new home sales could fall to a ten-year low of 350,000 as soon as this month.