Newly-Constructed Single Family Homes Dominate Inventory

Newly constructed single-family dwellings have reached the highest share of all homes for sale, according to a new report from Redfin.

The newly built homes accounted for 34.1% of all single-family homes for sale last year, up from 25.4% in 2020. Redfin says the surge began in mid-2020.

The 2021 hike in newly constructed homes is part of a larger push over the past ten years for them to take up an increasing portion of US housing inventory.

“Homebuilders have been busy trying to make up for the lack of existing homes on the market and keep up with high demand. There has been a surge in homebuyer demand since the start of the pandemic, stemming from low mortgage rates and the prevalence of remote work,” says the Redfin report.

The shrinkage of existing homes for sale has been exacerbated by homeowner refinancing or remodeling, Redfin asserts.

In December, the inventory of existing homes reached a record low of 1.8 months of supply by declining 14.2% year over year. In the same month, the supply of new homes moved to 6 months by climbing 34.8%.

Redfin Economist Sheharyar Bokhari says would-be homebuyers are increasingly likely to see new builds where they want to move to since a lot of pre-owned homes (generally priced lower) are flying off the shelves in a manner of days.

Looking into 2022, the report says the increase in the sale of new homes is likely to continue as builders bet demand from buyers will continue in the coming year as permanent remote work policies allow more people to move.

One such indicator is the number of building permits that were up 6.5% year over year in December, and up 9.1% from the month before. Building permits are government-granted authorizations that allow builders to begin construction.

Another indication of eagerness among contractors is builder sentiment in the market for newly built single-family homes moved one point higher to 84 in December, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). This ties the highest reading of the year that was posted in February 2021.

This was the fourth consecutive month of a rise in the index on strong consumer demand and limited existing inventory.