Approximately 29% of U.S. single-family homes for sale in the third quarter were new construction, a record for any historical third quarter, according to a report from Redfin. The share of new construction single-family homes for sale was 25% in the third quarter of 2021 and 18% in the third quarter of 2020. The share of new construction single-family homes for sale is typically seasonal, peaking in the first quarter and before reaching a trough in the second or third quarter.
According to Redfin, newly built homes have taken up an increasing share of the overall housing supply since home building rebounded after the financial crisis in 2011. The trend has been intensified recently due to a surge in construction during the pandemic and a decline of existing homeowners putting their houses on the market. Single-family housing starts increased 14% year over year in 2021, the largest annual increase since 2013, and more single-family homes were completed in the third quarter of 2022 than any quarter since 2007.
Data suggests “pandemic boomtowns” have the highest relative share of new homes for sale. Such metros ramped up building during the pandemic to accommodate the increased popularity from out-of-town buyers. A majority of metros with a high share of new homes for sale are in Texas or Florida, both popular pandemic migration destinations. El Paso, Texas, had the highest share of newly built single-family homes for sale (49.8%), followed by Oklahoma City (43%), Omaha, Nebraska (40%), Raleigh, North Carolina (39%), and Houston. North Port-Sarasota, Florida; San Antonio; Greenville, South Carolina; Boise, Idaho; and Charleston, South Carolina, round out the top 10.
However, completed single-family homes are becoming more difficult to sell due to rising interest rates. As a result, many builders will likely ease the pace of construction in 2023, according to Taylor Marr, deputy chief economist for Redfin.
“Home builders will take on fewer new projects next year as they focus on getting their existing projects sold,” says Marr. “Builders will also shift more toward multifamily units, for which there is still relatively high demand because rents remain high.”
