published : 2023-08-24
Housing Market's Salvation: New Home Constructions, Reveals Redfin
Inventory Dip Hits Record Low as New Builds Rise
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.
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.
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.