During the first quarter of 2021, one in four single-family homes for sale in the United States was newly built, the highest share on record, according to a Redfin report published last week.
Compared to the same period last year, the number of new construction homes for sale increased by 20.4 percent, spurred by ultra-low inventory in the resale market. In March, new home construction reached the highest activity level in 15 years, surging 19.4 percent month-over-month to a seasonally adjusted annual rate of 1.74 million units.
“Building homes has become more attractive and profitable during the pandemic due to record-low mortgage rates and red-hot homebuyer demand,” said Redfin Lead Economist Taylor Marr.
“At the same time, many homeowners have opted to stay put and refinance or remodel their existing homes instead of selling them, allowing new-construction homes to take up a larger portion of the market.”
New construction is also an attractive option for bidding war-weary homebuyers. The process of reserving a lot is relatively straightforward, and among most builders, the advertised price is what you will ultimately pay. That being said, rapidly rising lumber prices, which have increased the average price of a new single-family home by nearly $36,000, threaten to push some buyers to the sidelines.
The US markets with the highest share of new construction single-family homes for sale in the first quarter included El Paso, TX (53.2 percent), Boise, ID (46.7 percent), Houston, TX (35.5 percent) and Raleigh, NC (34.5 percent). In each of these metropolitan areas, building permits for single-family homes rose between 14 and 37 percent annually.
In the South, 25.8 percent of all single-family homes for sale were newly built, followed by the Midwest at 15.4 percent, the Northeast at 11.4 percent, and the West at a meager 8.4 percent.
Several California metros ranked near the bottom of the list, which Marr attributes to a lack of vacant land and space zoned for housing development. In Los Angeles, just 6 percent of single-family homes for sale were new construction, and nearby Riverside fared even worse at 3.4 percent, although the number of building permits in the Inland Empire city has climbed 29.5 percent since 2020’s first quarter.
Fresno, CA — which claimed the title of the nation’s hottest housing market earlier this year — came in last place with the share of newly built single-family homes at 2.4 percent. Oakland and Bakersfield performed slightly better at 2.9 percent and 3.2 percent, respectively.
Building permits, an indicator of future new construction home listings, saw the biggest improvement in Elgin, IL (68.3 percent), Tacoma, WA (58.9 percent) and Bridgeport, CT (57.9 percent). A handful of metros recorded a decline in the number of building permits for single-family homes, including San Diego, whose share fell 9.2 percent year-over-year.