The new-construction segment of the housing market continues to outperform the greater market, according to new analysis from Realtor.com. The overall housing market remains “stuck” due to persistently high interest rates, reluctant sellers, and low inventory. However, new homes continue to represent nearly one-third of the market, and the difference between the median price for a new home and an existing home continues to narrow, according to Realtor.com.
The housing market “is weak and it’s going nowhere fast,” says Mark Zandi, chief economist at Moody’s Analytics. “I don’t think it’s going to get any better. But I don’t think it’s going to get any worse—because it can’t get any worse.”
New-home construction is one bright spot in the market
New homes are becoming a larger part of the housing market since homeowners aren’t giving up their abodes. There’s so little available on the resale market, that buyers are increasingly turning toward new construction.
In July, nearly a third of all homes for sale were new construction, according to NAHB. Historically, new homes have made up only about 10% to 15% of the market.
“That really reflects how limited the amount of existing homes for sale is,” says NAHB chief economist Robert Dietz. For homeowners, “why would you put your home on the market and lose a low mortgage rate when you can just stay put?”
The gulf between the cost of a new home and one on the resale market has also narrowed. There was only a $30,000 price difference between a new home, at a median of $436,700, and an existing one, at $406,700 in July, according to the most recent government and National Association of Realtors® data.
Plus, builders are often able to buy down mortgage rates, either permanently or as a buy-down. This can save buyers substantial amounts of money, even if the savings are only temporary.
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