New Homes Dominate the Market: A Look at the Rise of New Construction in 2024

New Homes Now Account for One in Three Homes for Sale

The share of newly built homes in the U.S. housing market has seen a significant increase, nearly doubling compared to pre-pandemic levels. During the first quarter of 2024, newly built homes constituted 33.4% of single-family homes for sale, maintaining the previous year’s level and only slightly below the peak of 34.5% two years ago, according to a recent Redfin report.

This shift towards new constructions has been primarily driven by two factors. First, the pandemic-induced spike in homebuying demand led to a surge in U.S. home construction. The rise of remote work and historically low mortgage rates during the pandemic created a perfect storm, making home purchases particularly attractive. Second, existing homeowners have been reluctant to sell due to mortgage rates reaching their highest point in two decades. Many potential sellers prefer to hold onto their lower-rate mortgages rather than trading up to higher rates in the current market.

“We have a fair amount of new-construction homes for sale, and thank goodness we do,” noted Nicole Dege, a Redfin Premier agent in Orlando. “Buyers are having a hard time finding single-family homes within their budget because not many homeowners are letting go of their houses. Those who are listing tend to price high, not realizing that prices have come down from their 2022 peak. Builders have a better understanding of the current market, so they’re pricing fairly, offering mortgage-rate buy-downs, and providing other concessions to attract buyers.”

Surge in New-Home Sales and Builder Incentives

Sales of newly built single-family homes surged nearly 9% in March, reaching their highest level since last fall, according to the Commerce Department. This spike is attributed to limited inventory in the resale market, prompting more buyers to consider new construction. Home builders are showing greater willingness to offer incentives, such as price reductions, credits for closing costs, and mortgage rate buy-downs, which are helping buyers with affordability. The median sales price of a new home was $430,700 in March, compared to $393,500 for existing-home sales.

Challenges Ahead for Builders and Buyers

Despite these positive trends, the construction of newly built single-family homes dropped by 12.4% in March, with permits—a gauge of future construction—falling to a five-month low. Builders are also facing significant challenges due to limited lot inventory and restricted access to credit. “Builders are grappling on several fronts as the inflation fight continues,” said Carl Harris, chairman of the National Association of Home Builders. “Higher interest rates are increasing the cost of housing for prospective home buyers and raising the development and construction cost for builders of homes and apartments.”

Moreover, the latest new-home sales data do not reflect the recent rise in mortgage rates, with the 30-year fixed-rate mortgage jumping above 7% last week. Higher mortgage rates have already pressured home buyers’ budgets and contributed to a sluggish start to the spring homebuying season. Sales of existing homes fell 4.3% in March compared to February, according to the National Association of REALTORS®.

Michael A. DiNello
Michael A. DiNelloPartner & Chief Operating Officer | Vanguard Real Estate Group
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“New homes provide essential options for buyers facing a tight supply of existing homes. Builders' adaptive strategies, such as fair pricing and concessions, are crucial in maintaining balance in the housing market, especially during these times of high mortgage rates and fluctuating demand.”
About Vanguard Real Estate Group:

Founded in 2006, Vanguard Real Estate Group stands at the forefront of the industry as a fully integrated and seasoned real estate brokerage, advisory, and development firm. At the core of our operations is an extensive suite of acquisition, brokerage, capital advisory, and land development services tailored to Southeast Michigan.

Since our inception, Vanguard has seamlessly orchestrated real estate transactions exceeding $500 million, encompassing diverse assets like vacant land, multi-family properties, fractured condominium developments, non-performing CRE debt, and single-family residential communities.

Distinguished by a long-term commitment to developing distinctive residential communities in prime Metropolitan Detroit markets, Vanguard consistently delivers outsized, risk-adjusted returns to shareholders. With a track record exceeding $50 million in realized and in-process land development investments, we showcase our prowess in navigating diverse geographies and market segments.

Vanguard Real Estate

Sabrina Cusumano

Director of Operations

Ms. Cusumano leads key aspects of Vanguard’s operations, such as agent recruitment, Builder Division growth support, marketing, branding, and front-office management.