1 of every 5 homes for sale in April was new construction.
The number of newly built homes on the market fell just 10.5% year over year in April, the smallest decline in 2020 to date, while the supply of existing homes plunged 24%.
With the supply of existing homes sinking, new properties now make up a bigger piece of the pie. Last month, 1 in 5 homes on the market was a newly built home. That’s up from closer to 1 in 6 last year and represents the largest share since at least 2012.
The inventory of existing homes has plummeted amid economic uncertainty and health concerns fueled by the coronavirus pandemic, with an increasing number of Americans choosing to delist their homes or not even put them up for sale in the first place. Meanwhile, the supply of new-construction homes has seen a relatively small drop, as builders and homeowners approach home selling differently.
“Builders are running a business and focused on the bottom line, so they need to clear their inventory as quickly as possible at any given time, especially during an economic downturn,” said Redfin lead economist Taylor Marr. “Homeowners, on the other hand, decide to move, list and sell when the time is right, for the right price, and sometimes even to the right buyer. For many homeowners, a pandemic is not the ideal time to move and have strangers come through their homes, so those who have the flexibility are putting off listing for now.”
Still, builders have been putting fewer houses on the market than they did last year as they’ve had to halt projects amid restrictions on construction activity and permitting delays. New listings of newly constructed homes fell 12% month over month in April, though that pales in comparison to the 36.3% slide in new listings of existing homes.
When broken down by new-home type, condos fell the most, with new listings sliding 29.5% month over month in April. That compares with a 9.8% drop in new listings of single-family homes.
The Demand Side: Buyers Back Off
Sales of both new and existing homes sunk around 20% year over year in April, as buyers were less likely to purchase any kind of home—be it new or old—than they were at the same time last year.
The median sale price of new homes slipped 2.3% year over year in April to $359,000—the first monthly decline of 2020. Meanwhile, existing home prices were up 6.2% to $294,000.
When it comes to prices, new homes are typically hit harder than existing homes during downturns because they’re less affordable, Marr explained. More people who are purchasing new houses are now buying homes at the lower end of the new-construction market, which brings down the average price.
More New-Construction Highlights in April:
- New-home sales decreased year over year in 63 of 81 metros tracked by Redfin; New York (-57.4%) and Salt Lake City (-54.5%) saw the greatest drops, while Milwaukee (+50.6%) and Baton Rouge, LA (+20.3%) experienced the largest gains.
- On a regional basis, new-home sales fell the most in the west (-35.1%) and the least in the south (-13.9%)
- Building permits sunk 20.8% month over month to about 1.1 million, according to the U.S. Census Bureau. Housing starts fell even further, dropping 30.2%.
- The typical new home spent 85 days on the market before going under contract, down from 94 days during the same period in 2019. The typical existing home spent 31 days on the market, down from 39 the year before.