According to a recent report from Redfin, a real estate brokerage, about a third of the single-family homes for sale in the first quarter were newly constructed. This number is almost double the pre-pandemic levels.
Robert Dietz, chief economist of the National Association of Home Builders, on single-family homes for sale in the US, said that it does not mean that new construction has increased. He added that homebuilders are still constructing around 1 million single-family homes for sale annually. Dietz added that what has actually happened is that the supply of previously owned homes has decreased.
Here are some factors to consider when shopping for a newly built home.
Price Flexibility in Single-family Homes for Sale
Newly built single-family homes for sale might provide more pricing flexibility. With the housing market facing low supply issues, buyers are looking at new construction as they see more opportunities, according to Nicole Bachaud, senior economist at Zillow Group.
Builders tend to be more flexible with pricing compared to sellers of existing single-family homes for sale. They can offer offers like rate buy-downs, price reductions, and covering closing costs. According to experts, nearly two-thirds of builders use incentives like amenity upgrades and mortgage rate buy-downs to improve sales.
Dietz said that only about a quarter of builders are offering price reductions, which typically average around 5% to 6%.
The Difference in Cost
In March, the median sales price for new single-family homes for sale in the US was $430,700. Although new homes are still more expensive than existing ones, the difference has decreased significantly. Matthew Walsh from Moody’s Analytics said that prices are now much closer to being equal than in the past three decades.
In the past six months, the median price of new single-family homes for sale in the US has been just around 4% higher than the median price of existing single-family homes for sale. According to Walsh, this gap is much closer than before the pandemic when new homes were over 40% more expensive than existing ones. The amount of existing single-family homes for sale has led to an increase in the price. However, the pricing of new builds is affected by factors like interest rates, housing demand, competition for existing homes, and construction costs.
However, if you are considering buying a new single-family home for sale, remember that only 10% are ready to move in right away, according to Dietz. Most new single-family homes for sale are available at various stages of construction or are empty lots ready for building. Dietz said that today’s buyers need to make well-informed decisions while considering various housing types and locations.
Homeowners who are looking for single-family homes for sale should prefer smaller homes and be flexible with location. New builds in rural areas can be cheaper because of lower regulatory costs and more available land.
It is also important to plan for future costs, as property taxes may increase after purchase. According to Dietz, new builds offer long-term savings, offsetting higher initial costs.
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