Real Estate

published : 2023-08-24

Housing Market's Salvation: New Home Constructions, Reveals Redfin

Inventory Dip Hits Record Low as New Builds Rise

"A close-up of Redfin CEO, Glenn Kelman, deeply engrossed in analyzing the current real estate market trends. The image captures the intensity and concentration in his eyes, reflecting the current pressing situation in the housing market. Taken with Canon EOS 5D Mark IV."

Renowned real estate brokerage, Redfin, paints an intriguing picture of the housing market, as temple-shaking dynamics shift the supply and demand balance.

As per Redfin's CEO, Glenn Kelman, the housing market is experiencing an extraordinary phase as mortgage rates spiral past the 7% mark, an intimidating prospect for traditional homebuyers.

Consequently, real estate is facing a historic low in home inventory; nevertheless, a viable alternative is slowly, yet consistently, gaining prominence - newly constructed homes.

Despite homeowners' unwillingness to sell driven by towering mortgage rates, the construction industry stands invincible, its fervor unabated.

As Shauna Pendleton, a Redfin Premier agent in Boise illuminates, for a significant fraction of buyers, new construction has emerged as the sole resort.

"An aerial shot of a new construction site in Boise, Idaho, basking in the afternoon sun. The image showcases numerous unfinished houses, symbolizing potential new homes for prospective buyers. The busy workers embody the unabated fervor of the construction industry. Taken with DJI Phantom 4 Pro+"

The statistics affirm this shifting trend - almost a third of single-family homes introduced to the market in the second quarter were newly built, according to Redfin's latest report – an all-time quarterly record.

This uncovers the critical role new constructions are playing in anchoring the turbulent housing market amidst a stark deficiency of existing homes.

The remaining months of 2023 promise to present a 'tough' market challenge, as the industry grapples with an unprecedented scarcity of property.

The first quarter witnessed new home inventory near the record, at 33.6% - a slight seasonal drop is normalcy, but the inventory stood notably higher than the same period last year, and almost double the record during the pandemic at 17%.

In this landscape, builders have emerged as a consistent, reliable factor, their efficient operations blending with profitable yields to bring buyer-friendly rates, as noted by Redfin's CEO.

"A panorama of a quiet neighborhood in sunny Hercules, California, depicting a mix of new and existing single-family homes. A for-sale sign in the yard of a newly constructed property stands out prominently, representing the increased reliance on new constructions amid dwindling existing home inventory. Taken with Nikon D850."

Although builders are not producing as many single-family homes as compared to the high-demand phase in 2021 and early 2022, the scarcity of homeowner-led home sales has elevated the relevance and proportion of new constructions in the available inventory.

A disconcerting milestone was hit in June- the total housing inventory plummeted to an unprecedented low following a 15% annual decline.

Contrastingly, newly built single-family homes recorded a 4.5% year-over-year rise in the same month, in stark contrast to an 18% tumble for existing homes.

Thus, as analysts closely watch this evolving circumstance, it’s clear that new constructions may just be the crisis-savior for the property market, at least for the immediate future.