A surge in homebuilding before the pandemic is now driving growth in new-home sales. A shift to the suburbs and record-low mortgage rates are also contributing factors.
Sales of newly-built homes climbed 10.1% year over year in July, recovering to pre-pandemic levels, while sales of existing homes rose just 5.3%.
Meanwhile, the supply of new-construction homes for sale slid 28.4%, representing the largest drop since at least 2013, when Redfin began recording this data. Still, that wasn’t as severe as the record 37% decline in the inventory of existing homes last month. The relatively acute shortage of existing homes means that newly-built homes now make up one of every five houses for sale—the largest share on record.
“The shortage of both new and existing homes is intensifying across America right now as record-low mortgage rates drive more demand, but the shortage of new homes is less severe due to a surge in construction right before the pandemic,” said Redfin senior economist Sheharyar Bokhari. “As a result, sales of new homes are growing faster than sales of existing homes. Sales of new homes are also on the rise because the coronavirus pandemic is fueling interest in the suburbs—where there tends to be more space to build new homes.”
The number of newly-built homes on the market may continue to grow; residential construction projects in the U.S. surged 23.4% year over year in July, and building permits jumped 9.4% to a seasonally adjusted annual rate of 1.495 million, surpassing pre-pandemic levels. Still, uncertainty remains as homebuilders are now facing a lumber shortage that could hamper construction. Lumber prices are up more than 100% since mid-April amid reduced production at mills due to the pandemic and higher tariffs on imports of lumber.
New listings of newly-built homes increased 1.8% year over year in July, while new listings of existing homes rose 2.9%, likely reflecting pent-up supply as many homeowners who had postponed selling during stay-at-home orders are now listing their homes.
Prices of newly-built homes grew just 2.3% in July to a median of $375,000, while prices of existing homes jumped 9.3% to $308,000. Existing homes are typically more affordable, and consequently more desirable for many Americans, explaining the relatively high price growth.
“All of the suburbs around Oklahoma City are exploding with new construction—there are 50 homes being built within a two-mile radius of where I live,” said local Redfin agent Jeni White. “The only thing that has slowed down is the access to certain building supplies; one of my buyers didn’t get a smart-home gadget that was supposed to come with the home until two weeks after closing because it was stuck on a boat from China. Another buyer had to pick out a different type of granite for their house because of Chinese tariffs.”
More New-Construction Highlights in July:
- New-home sales increased year over year in 67 of 86 metros tracked by Redfin; Baton Rouge, LA (+103.1%), Worcester, MA (+71.9%) and Cincinnati, OH (+69.5%) saw the greatest gains, while the biggest drops were in New York (-58.7%), Salt Lake City (-39.3%) and Newark, NJ (-31.1%)
- The supply of newly-built homes fell in all but five metros—San Francisco, Knoxville, TN, New York, Newark and Milwaukee; the biggest declines were in Boise, ID (-80.5%), Salt Lake City (-72.2%) and Fresno, CA (-69.8%)
- New listings of newly-built homes gained the most in Montgomery County, PA (+64.5%), Greenville, SC (+39.5%) and Providence, RI (+36.9%); they dropped the most in Boise (-72.8%), Salt Lake City (-52%) and San Diego (-41.2%)
- The median sale price of newly-built homes rose the most in West Palm Beach, FL (+41.3%), Los Angeles (+28.3%) and Cleveland (+24.6%), and declined the most in Lake County, IL (-18.2%), Anaheim, CA (-11.9%) and Newark (-11%)
- A third of homes sold in Raleigh, NC were newly-built, the highest share of any metro, followed by Boise (28.6%) and Nashville (27.6%). Newark had the lowest share, at just 1.3%, followed by Cleveland and Fort Lauderdale, FL, both at 2.3%.
- The typical new home was on the market for 89 days before going under contract, down from 91 days a year earlier. The typical existing home spent 36 days on the market, down from 38 days in July 2019.
This post first appeared on Redfin.com. To see the original, click here.