The Rise of New Construction Homes: A Look at the Changing Real Estate Market

By Melanie Hands RN ~ The Probate Nurse

In the second quarter, home buyers had a wide range of options to consider, but one type of property stood out above the rest. According to a report from Redfin, a remarkable 31.4% of all homes available on the market were new constructions. This is the highest percentage ever recorded for the second quarter, demonstrating the growing popularity of newly built homes.

Comparing these figures to the pre-pandemic era, it becomes even more evident how much the landscape has changed. Prior to the global health crisis, new construction homes accounted for only about 17% of total home listings in the second quarter of 2019. Therefore, the current share of new homes is nearly double what it was just a few years ago.

Although there has been a slight decline from the first quarter of 2023, where new construction homes represented a larger portion of the market, their continued prominence emphasizes the increasing demand for these properties. This trend highlights not only the appeal of brand-new homes but also the evolving preferences of today's homebuyers.

Overall, the rise in the availability and popularity of new construction homes indicates a significant shift in the real estate market. As buyers continue to seek out modern and customized living spaces, the demand for newly built properties is expected to persist and shape the future of home buying.

In this latest blog post, I wanted to highlight an interesting trend in the housing market. During the second quarter of 2023, there was a decrease in the share of new-construction homes in Florida's Lakeland metro area, which was the only state metro area to experience this decline. Redfin, a real estate company, attributes this drop to a normal seasonal pattern where the share of new homes tends to peak during the winter months.

Interestingly, in other Florida metros, we saw a range of year-to-year changes in new-home listings. While some areas experienced a modest 0.2 percentage-point increase, West Palm Beach saw a more significant jump of 2.3 percentage points. This indicates that the demand for new homes varies across different regions within the state.

These findings shed light on the dynamic nature of the housing market and its susceptibility to seasonal patterns. It is crucial for prospective homebuyers and sellers to consider these fluctuations when making their real estate decisions.

Florida metro year-to-year changes in new-home listings 2Q 2022-2023

• Cape Coral: 26.6% to 27.22%, a 0.6 percentage point increase
• Fort Lauderdale: 4.4% to 4.6%, a 0.2 point increase
• Jacksonville: 4.4% to 4.6%, a 0.2 point increase
• Lakeland: 32.2% to 29.06%, a 2.6-point decrease
• Miami: 5.7% to 8.1%, a 2.4-point increase
• North Port: 25.3% to 25.8%, a 0.5-point increase
• Orlando: 19.3% to 19.6%, a 0.3-point increase
• Tampa: 17.4% to 18.4%, a 1.0-point increase
• West Palm Beach: 6.1% to 8.4%, a 2.3-point increase

Why the big increase in new homes?

• The pandemic-fueled homebuilding boom. Builders rushed to capitalize on the pandemic homebuying frenzy in 2021 and early 2022, driven by record-low mortgage rates and remote work.
• Lack of existing homes on the market. Builders aren’t constructing as many new single-family homes as they were at the height of the pandemic – but so few homeowners are putting their homes on the market that new homes still make up a huge share of available inventory. Total for-sale housing inventory dropped 15% year-to-year to an all-time low in June.
• Leftover inventory. Because elevated mortgage rates slowed homebuying demand, builders haven’t offloaded all the new homes they completed over the last few years. Although buyers made a dent in the glut of new-construction homes on the market over the last several months, there are still plenty of new homes available. The number of newly built single-family homes for sale was up 4.5% year-over-year in June, compared with an 18% drop for existing homes.

“Builders are still building but homeowners aren’t selling, so new construction is the only option for many buyers,” says Shauna Pendleton, a Redfin Premier agent in Boise, ID, where new homes made up nearly 40% of single-family inventory in the second quarter. “A lot of buyers want to secure a home now because they’re worried prices are going to go back up, and new construction is more plentiful with perks that are hard to pass up. One builder is doing a promotion where buyers get anywhere from $15,000 to $25,000 worth of concessions. It was supposed to end in June, but they extended it through July, and now they’re extending it through August. That money can cover all of a buyer’s appliances with money left over for a mortgage-rate buydown.”

Metro-level highlights: Q2 2023

• Metros where new construction is most prevalent: Newly built homes made up more than half (52%) of single-family homes for sale in El Paso, Texas, the biggest share of the metros in this analysis. It’s followed by Omaha, Nebraska (46%); Raleigh, North Carolina (42.1%); Oklahoma City (39%); and Boise, Idaho (38%). New construction is typically prevalent in parts of the country with sprawling land and loose building codes.
• Metros where new construction is least prevalent: Newly built homes made up just 2.8% of single-family homes for sale in Honolulu, the smallest share of the metros in this analysis. Next come San Diego (3.3%); Pittsburgh, Pennsylvania (3.3%); Oxnard, California (3.7%); and Detroit (3.8%). New construction tends to be relatively uncommon in California because of limited land and strict regulations.
• Metros with the biggest uptick in newly built homes: New homes made up 33% of single-family inventory in Tulsa, Oklahoma, up from 20% a year earlier. That’s the biggest jump of the metros in this analysis. It’s followed by Richmond, Virginia (35%, up from 23%); Albany, New York (24%, up from 13%),; Phoenix (26%, up from 15%); and Elgin, Illinois (25%, up from 15%).
• Metros with the biggest declines in newly built homes: Boise saw the biggest year-over-year decline by far, with new homes making up 38.3% of inventory, down from 49% a year earlier. It’s followed by Austin, Texas (30.4%, down from 34.5%); Honolulu (2.8%, down from 6.4%); Allentown, Pennsylvania (14.9%, down from 18.5%); and Houston (35.3%, down from 38.5%).

Ultimately, the housing market is an ever-evolving landscape influenced by a complex interplay of factors. By keeping a finger on the pulse of these trends, we can better position ourselves to seize opportunities and make sound real estate choices. So, whether you're seeking your dream home or considering putting yours on the market, it pays to stay informed and adapt to the changing dynamics of the market.

*Data courtesy of Florida Realtors

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