Inventory benefits from new construction

According to a new report from RedfinmMore than 34.1% of single-family homes for sale in the United States in December were new construction, up from 25.4% a year earlier and the highest share on record.

Newly built homes have begun to take a growing share of US housing inventory over the past 10 years, with a significant increase in mid-2020 after the pandemic began. Homebuilders have been scrambling to fill the shortage of existing homes on the market and meet the high demand. With increased buyer demand since the start of the pandemic, driven by low mortgage rates and the prevalence of remote working, some homeowners have chosen to refinance or renovate instead of selling, exacerbating the housing shortage. existing homes for sale.

Overall inventory fell to a record low in December, with existing home inventory falling 14.2% year over year, and supply hitting a record high of 1.8 months. For new homes, there was six months of supply and inventories increased by 34.8%. While the share of homes for sale in new homes has increased, the share of home sales that are new construction has remained relatively constant, around 11%. This is another indicator that buyer demand far exceeds supply.

“A lot of second-hand houses are listed, but they sell out so quickly – usually within days – while new houses take longer to sell,” said Sheharyar Bokhari, an economist at Redfin. “So, as a home buyer, you are more and more likely to see new construction when you search for homes for sale in your target area. Existing homes tend to be cheaper and sell faster, so people new to the market should talk to their lender and agent to be prepared to act quickly when an existing home that meets their criteria will hit the market this winter,” Bokhari said.

In Houston, 39.5% of homes for sale were newly built in the fourth quarter, the largest share of the 50 metros in this analysis. It is followed by Minneapolis at 38.3% and San Antonio at 37.5%. Texas metros top the list because they generally have more land to build new homes on and relatively lenient building regulations.

At the other end of the spectrum, three California subways had the smallest shares of new-build inventory. In San Diego, 3.1% of homes for sale were newly built, followed by Anaheim at 3.8% and Los Angeles at 4.4%. California has a lack of vacant land and less zoned space for housing development.

Building permits are up, another signal that the supply of new homes will continue to increase. The number rose 6.5% year-over-year in December and 9.1% from the previous month.

The upward trend in building permits at the end of last year is a sign that the supply and sales of new homes will continue to increase in 2022. Builders are betting that buyer demand will continue over the course of the coming year, as permanent remote work policies allow more people to move. More new homes in the pipeline should help boost the overall supply of homes for sale.