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New Construction Homes in the Market: Why Are They So Prevalent?

Data from U.S. Census Bureau.[2]

New construction homes have spiked in popularity over the recent years for many reasons. According to Dana Anderson from Redfin, this market trend has three main causes.[5] Many homes were built during the pandemic when mortgage rates dropped dramatically. However, in the aftermath of the pandemic, rising mortgage rates have made many pre-existing homeowners reluctant to move out and give up the lower rates they locked on their preexisting homes. This sentiment affects the presence of new construction homes on the market because so many have been built, but the market lacks the housing demand to buy all of them.

Additionally, while new home sales are trending upwards, the sales of existing homes have dropped since May 2022.[1] These findings back the claim that many pre-existing homeowners are unwilling to sell their homes due to the spiking interest rate. Recently, average mortgage rates have been steadily dropping week-by-week, hitting their lowest since September of 2023.[4] However, even with these drops, the mortgage rates are still significantly above what they were in 2022 and nearly double their pre-pandemic numbers.[3] With these numbers, it makes sense that many homeowners are unwilling to part with their current homes and their much lower mortgages.

The prevalence of new construction homes on the market has forced many buyers into purchasing them. In a Zillow survey reported by Manny Garcia, there are more new home buyers than existing home buyers in every generation except Gen Z, categorized as ages 18 to 28.[6] The same study highlights Texas, Florida, and California as the top 3 states for new construction homes. While their data shows buyer preferences have stayed the same since 2021, this shift in purchasing habits is likely due to the aforementioned excess of new construction homes on the market. The current popularity of new construction homes reflects the state of the market and the lack of supply for existing homes rather than buyers explicitly looking for them.

If you are a buyer on the market, contact Kho and Young! We can help you find new and existing homes that best suit your needs.


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