Low prices are reeling buyers back to the new-home market, says Redfin

by Candyd Mendoza15 Nov 2019

As builders start to fill in the inventory gap with new homes, more Americans are seizing the opportunity to buy these low-priced new homes.

New-home sale prices fell 1.5% annually to a median of $370,300 in the third quarter, marking their biggest drop since at least 2012, according to Redfin’s latest report

The decline spurred an increase of 5.6% in new-home sales, which continued to rise for the second straight quarter. The supply of new homes experienced its largest inventory cut since 2012, shrinking 7.9% year over year.

"Buyers are returning to the new-home market thanks to low mortgage rates and relatively low prices," said Redfin Chief Economist Daryl Fairweather. "And builders, also taking advantage of low-interest rates to fund projects, are paying attention to preferences for affordability, which has led to more sales.

The trend was the same for existing homes as prices climbed 4.2% and sales increased by 2.1%, while inventory sank 6.9%.

The price decline for new homes was partly a reflection of builders’ efforts to meet buyers’ demand for affordability, which boosted sales, according to Redfin.

The surge in sales, along with an approximate 10% year-over-year gain in residential building permits, indicates the start of moderate recovery for the new-home market.

“Residential construction was a bright spot in the economy in the third quarter, a sign that builders are working to fill an inventory gap,” Fairweather said. “As we head into the new year, I expect more new-home listings to hit the market, which should help sustain the relatively high level of sales."