Existing homes historically make up about 87% of home sales, largely because there tend to be a lot more of them, and generally at a lower price. But the 2023 home market is a somewhat different playing field.
Because of persistent low inventory, more and more home shoppers are unable to find suitable existing homes in their price range. Most existing homeowners are locked into mortgage rates significantly below market and are unwilling, or unable, to list their home for sale.
With today’s low inventory, existing home prices are not declining much, leaving room for new home sales to rise. In the high-mortgage rate environment, builders may be more open to negotiation because, unlike existing homeowners, they must sell their inventory.
Many builders have been willing to offer incentives and discounts to buyers in the form of seller credits at closing and home upgrades.
Negotiating is a big part of today’s new home shopping. In March, 31% of builders reduced home prices, and 58% offered incentives. The median sales price for a new home in April 2023 was $420,800, down $76,000 from the October 2022 peak of $496,800. The median sales price for all homes was $388,000.
At this point, new home affordability is reasonably affordable, especially if there are two household incomes qualifying.
New housing features modern and spacious floor plans and plenty of natural light. Equipped with new appliances and technology, they tend also to be more energy efficient, lowering utility bills and making them more environmentally friendly.
While an existing home might have maintenance or other hidden problems, a new home is generally free from any such issues. Builders use high-quality materials for everything from the foundation to the roofing, providing a comfortable and safe living space and a sound investment for the future.
New home builders provide a limited guarantee of their workmanship, and often, the buyer can negotiate a longer-term home warranty, giving peace of mind and protection against any future unforeseen issues.
Existing homes might have lower list prices, but buyers should not shy away from newly built homes on price alone. Builder confidence is growing, which means fewer incentives may be offered in the future.
April single-family starts increased by 1.6% to a rate of 846,000 units, continuing a three-month rebound amid the unexpected strong demand. Including multi-family units and apartments, the April turnaround saw total housing units rise to a seasonally adjusted annual rate of 1.40 million, up from the revised March estimate of 1.37 million.
Overall, housing starts are down 17.2% year over year, mostly due to a slowdown in apartment building, which had been booming.
Single-family housing starts were down 22.3% from April 2022.