According to a Redfin Corp RDFN analysis issued this month, newly built single-family homes made up roughly one in three U.S. home sales in the third quarter. The third-quarter share was the largest ever recorded, up 25% over the previous year.
The rise in "pandemic boomtowns," is partly to blame for the increase in new construction. This was true for places like Texas and Florida, where a few communities ranked as the top migration hotspots as a result of their reasonable cost of living.
For example, in El Paso, Texas, half of all home sales in the third quarter were newly built single-family homes. Other well-known cities where listings for freshly constructed single-family homes increased were:
- Oklahoma City, Oklahoma
- Omaha, Nebraska
- Raleigh, North Carolina
- Houston, Texas
“Home builders started scores of projects during the pandemic moving frenzy and are now stuck with a bunch of new houses that are hard to sell because mortgage rates have risen to 7%,” said Faith Floyd, a Houston-based Redfin agent.
Some of the newly built homes are being used as investment vehicles, with investors buying up a large chunk of the new home inventory.
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Floyd continued, “builders are giving away everything but the kitchen sink to attract bidders. Many are offering to buy down the buyer’s mortgage rate by 1.5 points, and I’ve seen at least one offer a $10,000 check for closing costs, a $3,000 gift card and a free fridge. This is one way builders will dig themselves out of the hole they’re in.”
According to Taylor Marr, Redfin's deputy chief economist, new construction is projected to slow down in 2023 as developers place more of an emphasis on selling off existing inventory before starting new projects.
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