- With high mortgage rates, millions of homeowners have been reluctant to sell because they cannot afford to give up their current low mortgage rates. At the end of May, only 1.08 million existing homes were for sale or under contract, the lowest monthly level since the National Association of Realtors started collecting data in 1999.
- Consequently, would-be buyers are turning to new construction as a viable option. New constructed homes accounted for nearly one-third of single-family homes for sale nationwide in May, compared with the historical norm of 10% to 20%. Existing-home sales in May fell 20% year-over-year; new single-family home sales in May rose 20% on an annual basis.
- Even with the increase in newly constructed homes, there is still a dearth of available housing. Builders can’t build fast enough and with the lack of existing housing, buyers are still facing high home prices, expensive mortgage rates and bidding wars.
- Even though demand has rebounded for new construction, to offset this challenging market, home builders have had to be creative in how they attract buyers. Affordability has been an issue and builders are compensating with less extravagant building models to meet a lower price point. Builders also started sweetening the deals to attract buyers. About 52% of builders provided incentives in July, up from 43% in July 2022 like paying to lower buyers mortgage rates to make monthly payments more affordable.
- Thanks to this sturdier-than-anticipated demand, builders forecast a 7% increase in sales for 2023, according to an April survey by John Burns Research & Consulting, reversing their forecast of a 9% drop when surveyed in November. As one builder put it, “We’re all relieved now that we had a really good first half of the year. This is not a market to be scared about.”
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