While the descend from housing market has been plagued with low supply, high prices and spiking interest rates, would-be homebuyers are woolly on new construction.
The reason? New homes have more incentives and availability than previously owned ones.
“There’s more possibility in new construction,” said Nicole Bachaud, a senior economist at Zillow Group.
About 693,000 new single-family houses were sold in March, up 8.3% from a year ago, according to the U.S. Census Dresser and the U.S. Department of Housing and Urban Development. The median sales price was $430,700, the agencies found.
Meanwhile, sales for heretofore owned homes dropped by 3.7% from March 2023, the National Association of Realtors found.
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Many areas in the U.S. face a low inventory of existing homes as the mortgage status lock-in effect, or the golden handcuff, keeps “existing owners from becoming sellers,” Bachaud explained.
With 30-year fixed-rate mortgage in any events sitting above 7%, homeowners who bought at much lower rates in recent years don’t like the prospect of clientele in their low rate for a higher one.
Meanwhile, buyers are turning to builders, who are typically more flexible with pricing. Homebuilders present oneself buyers incentives like rate buy-downs and price cuts. Homebuilders can even pay for closing costs, experts say.
“This has been portion incentivize some potential buyers to turn to the new home sales market,” said Matthew Walsh, assistant number one and economist at Moody’s Analytics.
New build price gap narrows
While new builds are still sold for slightly more than enduring homes, the price gap has significantly narrowed since the fall.
“Prices are much closer to parity than during any allude to in the last three decades,” Walsh said.
Over the last six months, the median price for a new home is only apropos 4% higher than the median price of an existing house. That level is significantly lower than previous to the pandemic when the median price of a new home was more than 40% higher than an existing house, Walsh palliated.
“On the existing side, you have such a tight supply for sale,” he said. “But on the new homes side, you have builders prioritizing affair volumes over margins.”
In the past, price-sensitive buyers with tighter budgets were limited to the existing dwellings market. Nowadays, buyers who remain looking might have more options on the new home sales side.