New homes make up more than 30% of for-sale inventory

New homes made up close to one-third of for-sale units in the second quarter, as an ongoing scarcity of existing inventory helped keep the level near a record high, Redfin reported.

New construction accounted for 31.4% of the market, the largest portion in the quarterly period on record. The number increased from 30.3% between April and June last year, but was down from the first-quarter all-time record of 33.6%. 

By comparison, new homes represented just 17% of for-sale inventory in the second-quarter of pre-pandemic 2019.

A combination of pandemic-related factors are propping up new-home numbers, even as builders are producing a smaller number of units compared to a few years ago. Surging interest rates, which are almost 4% higher today from their level in early 2022, resulted in a lock-in effect, where homeowners are now hesitant to move to take out a new mortgage at current levels, leaving the existing-sales market sluggish. 

Meanwhile, outstanding inventory remains from a pandemic-fueled building rush in 2021 and early 2022, providing some potential opportunities for aspiring buyers while resale-home availability remains low, Redfin said.

"Builders are still building but homeowners aren't selling, so new construction is the only option for many buyers," said Shauna Pendleton, a Redfin agent in Boise, Idaho. 

In June, the total amount of for-sale inventory fell 15% on an annual basis to an all-time low, the real estate brokerage said. The existing-home market fueled the drop, with an 18% decline year-over-year. The number of newly built single-family homes for sale, though, increased 4.5% by comparison, leading builders to offer a number of concessions to buyers in order to move units off the market.

Redfin's quarterly data coincides with similar recent findings by other housing researchers. Online listing service Realtor.com said overall home selling trends were pointing to the potentially lowest sales numbers this year in over a decade. 

At the same time, new-home buying activity is showing hints of resilience in the overall housing market. Consumers are still willing to consider purchasing even amid elevated rates, economists have noted. The volume of loans taken out to purchase newly built units is consistently higher in 2023 compared to year-ago levels, according to the Mortgage Bankers Association, which also recently said the segment would be "key to the housing market recovery in 2023." 

The market with the highest share of new homes for sale relative to total numbers was El Paso, Texas, at 52.1%; followed by Omaha, Nebraska; Raleigh, North Carolina; and Oklahoma City, at 45.5%, 42.1% and 39.3%, respectively.

While builder-constructed homes in Boise made up a 38.3% slice of inventory in the second quarter, landing the city fifth on the list of metropolitan areas ranked by total market share, it also experienced the largest annual decline in new houses put up for sale. The share decreased by almost 11 percentage points from 49% one year earlier.

The city that experienced the second largest decline was Austin, Texas, where new homes on the market decreased to 30.4% of inventory compared to 34.5% in the second quarter of 2022. Honolulu, which ranked third in this category, saw its new-home share drop to 2.8% from 6.4%.