New Construction Becoming Popular Among Homebuyers Due To Incentives and Availability Amidst Low Supply

While the spring housing market has been affected by low supply, high prices and rising interest rates, potential homebuyers are focusing their attention on newly constructed properties instead of pre-owned ones. The main reason for this shift is that there are more incentives and availability in new construction compared to previously owned homes currently experiencing a lack of inventory due to the “mortgage rate lock-in effect,” where existing owners hesitate to sell because they don’t want to trade their lower mortgage rates for higher ones. Homebuyers seeking out builders find them more flexible with pricing and can expect benefits such as interest rate buydowns, price cuts or even assistance covering closing costs according to experts like Nicole Bachaud from Zillow Group and Matthew Walsh of Moody’s Analytics who further notes that while new builds are still pricier than pre-owned ones, the gap has narrowed significantly since autumn. The median sales prices for newly constructed homes have only risen by about 4% over existing houses in recent months compared to a more significant difference before the pandemic when newer buildings sold at an inflation of nearly forty percent above comparable pre-loved residences as highlighted by Walsh’s analysis. This shift has been beneficial, especially for price sensitive buyers who previously had limited options on the new homes sales side due to tighter budget constraints.