When Joel Adler decided it was time to downsize his six-bedroom home in Parkland, Florida, where he had lived for more than 20 years, he was frustrated by the lack of options.
“There weren’t a lot of houses worth looking at,” said Mr. Adler, a 76-year-old retired teacher who had been searching for a year and a half.
Eventually, they turned to Valencia Sound, a gated community in Boynton Beach, Florida, which opened in 2019, joining the growing number of homebuyers who opted for a newly constructed home rather than an existing home, which was otherwise a rare bright spot. The place is. Sad market.
The housing market has been stuck for most of the past year due to high prices, rising mortgage rates and a shortage of inventory, which has sidelined many potential buyers.
Sales of existing homes are typically around 90 percent, but homeowners who hold low-rate mortgages are reluctant to sell, resulting in limited options for potential buyers and skyrocketing prices. Last year, existing home sales fell to the lowest level in nearly 30 years, while the average price hit a record high, according to a recent report from the . National Association of Realtors,
This led to a surge in construction, as developers rushed to meet demand and began offering incentives to entice buyers. Sales of new homes increased by 4.2 percent from last year by 2022 census Bureau Reported on Thursday.
“The new home market has been a bright spot, bucking the trend a bit,” said Odetta Kushi, deputy chief economist at First American Financial Corporation, a real estate services company. He said inventory of new homes has now increased from 11 percent to 30 percent of the total market.
The growing choice of new homes attracted Steve Hawthorne, co-owner of the shoe store Vertical Runner in Hudson, Ohio. After owning older homes most of his life, he said, he was tired of the maintenance costs.
“It’s a big headache,” said Mr Hawthorne, 49. “When it came time to buy another house, I thought I would buy a new house this time.” Planning to move west, they purchased a two-bedroom home in Summerlin, a planned community outside Las Vegas developed by Howard Hughes Holdings.
Buyers like Mr. Hawthorne are jolting the economy; The Commerce Department reported Thursday that residential investment, which includes construction and purchases of new homes, jumped in the second half of last year, off a 6.7 percent annual pace in the third quarter and a 1.1 percent increase in the fourth.
That’s a boon for developers like Howard Hughes, which said in its most recent earnings report that it sold twice as many new homes in the third quarter as it did a year earlier. The company’s chief executive is David R. “Our job is to make sure we have enough homes to meet buyer demand,” O’Reilly said.
Since March 2022, the Federal Reserve has raised interest rates 11 times in an effort to reduce inflation. That sent mortgage rates higher: According to Freddie Mac, the average rate on a 30-year fixed-rate mortgage rose above 7 percent last summer, after falling below 3 percent during the pandemic, and recently hovered around 6.7 percent. Has reached.
“The consensus is that mortgage rates will remain at these levels for some time,” said Jeff Ostrowski, analyst at consumer financial services company Bankrate. His firm forecasts that mortgage rates will rise. fall below 6 percent By the end of 2024, as the Fed has indicated it will begin cutting rates this year.
The housing market will take time to adjust, as the supply of new and existing homes increases and puts upward pressure on prices. “There is a real shortage of inventory,” Mr. Ostrowski said. “I got a call this morning from someone asking if I wanted to sell my house.”
Home prices nationwide rose 0.4 percent in December from the previous month, the third consecutive month of slow growth and the smallest increase since June. A report from RedfinA real estate services company.
New homes are generally more expensive than existing homes, and builders are reconfiguring floor plans and shrinking room sizes in an effort to attract budget-conscious buyers.
Sellers of new homes are also offering incentives such as discounts on mortgage rates and upgraded features such as new appliances and countertops, said Ms. Kushi, the First American economist.
“It’s a question of affordability,” he said. “How do you get people in the door? As a builder, you don’t want to lower prices.”
Mr. Hawthorne, the buyer in Nevada, said he was able to negotiate a new washer and dryer and epoxy floors in his garage. “In the grand scheme of things, they weren’t big-money items, but they were nice amenities,” he said.
And when they opted to buy a new home, Mr. Hawthorne said, they faced less pushback from rival buyers.
“When money was cheap, competition was very high,” he said. “When I closed in early September, there was hardly anyone watching.”