This May Be the Best Time to Buy A New Build
Roughly 32% of All Listings in Q4 ‘23 Were Newly Constructed Homes
Developers and residential builders have gone on a new-construction tear. Not only is there a nationwide oversupply of Class A Luxury Apartment units, but the number of new built homes approached an all-time high.
In Q4 of 2022, the portion of listings that were newly built homes hit 31.9% - the highest level of any fourth quarter on record. One year later, new-construction single family homes still make up 31.8% of all listings nationwide.
Once the dust from the ‘08 Financial Crisis settled, homebuilders slowly began to ramp up production. Development was kicked into overdrive during the pandemic in an effort to meet the overwhelming demand caused by historically low interest rates. Builders such as DR Horton, KB Homes, and Lennar, recognized that there wasn’t hardly enough inventory to go around, and in Q1 of 2022 the share of U.S. single family homes for sale that were new construction climbed to the highest level on record - 34.5%.
Twenty-four months later, homebuilders are continuing to push out new product, and in an effort to move inventory, they’re offering sizable concessions and interest rate discounts.
High interest rates and unaffordable monthly mortgage payments have been the biggest deterrent and roadblock for buyers throughout much of 2023 and Q1 of ‘24. To alleviate the pain caused by the Fed, and attract interest to their newly built communities, builders are allowing purchasers to buy down their rate and secure a monthly payment that will be lower than any other 3rd party lender can offer. Furthermore, they’re providing thousands of dollars in closing credits; which can drastically reduce the total amount of money a new homeowner will have to bring to the table at signing.
The saturation of new construction inventory, coupled with builders’ overwhelming willingness to negotiate, sets the perfect stage for home-shoppers looking to secure a brand new home in 2024. There’s plenty of builders to choose from, and they all want you to call their community home.
Aside from the typical pro’s of purchasing a newly built home - minimal maintenance, the ability to customize throughout the construction process, and modern finishes - they can also be a sound investment. In 2020, only 18% of single-family new construction hit the half-a-million mark. In 2021, the share of $500K+ new-build listings nearly doubled; rising to 30%. In 2022, roughly two in every five (42% of) new construction single family homes sold for at least $500,000 or more.
As neighborhoods continue to sprout up across the nation, opportunities to secure new construction real estate will rise as well. The current housing climate allows today’s buyers and investors to enter the market in the dip - where there’s little to no competition and prices are slow to rise. From here, homeowners can ride the wave of appreciation and growth back to the top, as interest rates fall and buyer demand increases.
But as with any investment or financial decision, timing is everything. Those that are slow to pull the trigger on their next purchase, can find themselves in a highly competitive housing environment similar to 2020 - ‘22; where sellers are the gatekeepers, and buyers are forced to bid against themselves in order to lock in a half-decent deal.
If you’re considering a home purchase or investment this year, and you’d like professional guidance and assistance throughout the process, our team is more than happy to help.
In Other News
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