In recent years, there has been a noticeable increase in the number of newly built homes hitting the market. According to a report by Redfin, approximately 33.4% of single-family homes available for sale in the first quarter were new builds, nearly double the pre-pandemic levels. This surge in new construction homes has been attributed to a shrinking level of resale inventory, rather than a significant increase in new construction projects. Despite the fact that builders are still constructing around 1 million single-family homes each year, the demand for new builds has been steadily rising.
Buyers are turning to new construction homes due to the increased level of opportunity they offer in a housing market plagued by low supply. Unlike sellers of existing homes, builders are more flexible when it comes to pricing. They often provide incentives such as rate buy-downs, price cuts, and coverage of closing costs to entice buyers. In fact, nearly two-thirds of builders are implementing some form of incentive to boost sales, with price reductions averaging around 5% to 6%. The median sales price for new houses in the U.S. stood at $430,700 in March, indicating a narrowing price gap between new builds and existing homes.
If you are considering purchasing a new construction home, there are several factors to keep in mind. Firstly, only about 10% of new homes available for sale are completed and move-in ready. The majority of new homes are at different stages of construction or sit on empty lots waiting to be built. Buyers should be strategic, patient, and flexible when navigating the process, from considering different types of housing to making design decisions.
1. **Consider a Smaller House**: Builders have been focusing on slightly smaller homes since 2021 to address affordability concerns. Reducing square footage can help lower construction, utility, and maintenance costs in the long run. Townhouses are becoming more popular, with almost 18% of single-family housing starts in the first quarter falling into this category.
2. **Be Open to Different Locations**: New construction homes may be more affordable in rural areas due to lower regulatory costs and greater land availability. It’s worth exploring different geographic locations to find the best value.
3. **Keep Construction Costs Down**: Factors like lumber and labor costs can significantly impact the overall cost of a new home. Focus on completing the essential structural elements of the house and opt for basic or lower-cost finishes during construction to save money.
4. **Plan for Future Costs**: Budget for potential cost increases after the first year of owning a new build, such as property tax adjustments. Newly built homes are typically more energy-efficient and resilient, which can lead to lower operating costs in the long term.
The rise of new construction homes offers buyers a range of opportunities and challenges to navigate. By understanding the current market trends and implementing the right strategies, buyers can make informed decisions when considering purchasing a newly built home.
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