New-home sales rise while bidding wars lessen
Affordability gains on new homes sparked sales as builders focused on the price points where inventory was needed, according to a Redfin report.
For the second consecutive quarter, new-home sales grew year-over-year. They rose 5.6% in the third quarter as prices fell by 1.5%. That was the largest decrease since at least 2012, to a median of $370,300, marking the third straight quarter of annual declines.
"Buyers are returning to the new-home market thanks to low mortgage rates and relatively low prices," Daryl Fairweather, Redfin's chief economist, said in a press release. "And builders, also taking advantage of low interest rates to fund projects, are paying attention to preferences for affordability, which has led to more sales.
"Residential construction was a bright spot in the economy in the third quarter, a sign that builders are working to fill an inventory gap. As we head into the new year, I expect more new-home listings to hit the market, which should help sustain the relatively high level of sales," Fairweather said.
In spite of the bump in sales, new-home supply decreased 7.9% annually. Builders were more discerning, gearing their efforts towards the soft spots in the market where demand dictated.
"While buyers in Raleigh have always been interested in new homes, construction nearly ground to a halt after the Great Recession as builders were scared of being left with newly built homes they wouldn't be able to sell," said Allen Wyde, a Redfin agent in Raleigh, N.C. "In the last two years, builders have loosened the reins and started constructing homes without a buyer in mind. And they're selling."
This is all happening in the face of a downturn in bidding wars. Only 10.1% of all offers through Redfin — for both new and existing homes — received competition in October, down from 38.7% the year prior. It's a downward trend that's carried through 2019, though that could soon change.
"Right now, there are fewer homes for sale than we usually see this time of year, and sales are picking up thanks in part to low mortgage interest rates. All of the pieces are in place for bidding wars to become more common and for the housing market to shift back toward the seller's favor next year," said Fairweather. "Now may be the last chance in the foreseeable future for buyers to win a home without facing a bidding war."