As mortgage rates increase and available listings shrink, new houses are becoming more and more appealing to buyers. To put things into perspective, single-family homes built in the last quarter comprised 30.6 percent of U.S. single-family home inventory in the last quarter, per the latest Redfin report. This is the highest percentage in any third quarter in history.
Single-family home sales also rose by 12.3 percent to a year-round adjusted rate of 759,000, the most from February 20, 2022, according to the latest figures provided by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development.
Construction Rates Are Through The Roof.. Why?
The rise in single-family home construction rates could be attributed to several significant factors, like the high rate of mortgages, a decrease in existing sales of homes, and the need for new construction affordable.
The Great Majority Of Homeowners Aren’t Selling
Buyers are shifting towards new single-family homes as a result of an increase in the number of existing properties on the market. The month-over-month sales of existing homes rate slowed by 2%, according to the most recent figures from the National Association of Realtors.
The decline in home sales could be attributed to the rising mortgage interest rates. In the second week in November, mortgage rates sat at around 8% for 30-year fixed mortgages and 7% on 15 fixed loans. In contrast, fixed rates for 30-year mortgages averaged about 7.08%, and 15-year fixed rates sat at 6.38 percent a year ago.
Many homeowners who purchased their homes when interest rates were lower stay with their current mortgages rather than return to the market and have more expensive interest charges. This phenomenon is referred to in the context of the “lock-in effect.” More than 90% of homeowners have a mortgage rate that is below 6.6%. To allow listings on existing homes to rise, the mortgage rate, it would have to drop until they are at a level that is beneficial to homeowners who are already in the market.
New Construction Homes Are Cheaper
Despite increasing mortgage rates, the monthly cost for new single-family homes fell by $433,100 to $418,000. The average cost for an existing home is nearly $100k more at $520,000 as per the most recent information. This drop in price has enticed buyers to new construction.
Builders provide concessions and other incentives to draw buyers and to clear inventory. Concessions refer to the costs of home buying that builders or sellers take care of to improve the offer for potential buyers. They can be used to cover mortgage buydowns if builders offer discount points to get lower rates, repairs and closing expenses.
“Sellers are being faced with a fierce opposition from builders, which are often offering buyers as much as $30,000 discounts,” reported Redfin Premier real estate agent Kim Lotz in a recent report. “With this amount of money buyers can pay for expenses for closing and home improvements as well as pay off their mortgage rates.”
How Can I Purchase A New Construction Home
If you’re in search of an apartment but are unable to locate any listings which meet your needs new construction homes might be the ideal choice. The process of purchasing for a brand new home differs from buying an existing home.
Here are the important steps to follow:
- Get preapproved by the lender.ย To begin the process, you’ll have to be preapproved by several lenders to assess your buying capacity. For pre-approval, you need to give details about your credit rating, including income, employment, and assets.
- Employ an agent in real estate.ย Once you get approved, employ an agent who can talk to the builder and help you navigate the procedure. Certain builders might also pay your agent’s cost in exchange for an award.
- Choose your timeframe.ย The timeline for the building of your new house is something you should take into consideration. If, for instance, you’re selling your current property, you might need to locate a temporary home until the new house is finished. When you are ready to move into your new home, you’ll need collaborate with your builder and agent to determine the length of time the construction process will take and how it will affect your life.
- Select a place.ย Before you build your dream home, you must choose the area you want to build in and examine it to make sure it meets your requirements and life style. A few of the most important aspects are the crime rate, schools as well as proximity to amenities and many more.
- Negotiate an amount.ย Once you complete the previous steps, choose an appropriate lender and negotiate the sale price. This is based on the exterior and interior options you pick.
At the end of the day, the market is becoming more challenging, which in turn, is creating volatility industry-wide. Before you start your real estate search, make sure you survey the resale, manufactured housing and new construction market thoroughly. This will give you the best chance to get the best bang-for-your-buck as you search for your forever home.
