New Home Sales Surge in Q1
New Homes Are Comparatively Cheaper to Buy
The supply of new homes for sale has skyrocketed as builders react to increased demand. 25.7% of single-family homes on the market in the first quarter of 2021 were newly constructed—a record in the industry. That is up from 20.4% in the first three months of 2020.
Many of these new houses were cheaper than existing homes. The median price for a new home was $330,800 in March, which is up 0.8% from a year ago. An existing single-family home costs $334,500.
The construction of new homes has accelerated during the COVID-19 as an increase in homebuilding coincided with fewer Americans putting their houses up for sale. The construction increase is expected to continue as many markets still have limited inventory.
A Shortage of Existing Homes
Homebuyers are setting their sights on new home construction because of bidding wars breaking out in neighborhoods across the country. Historically, there has been less competition for new homes. That may not be the case in pockets of the US where waitlists for new homes often have more than 90 buyers.
Sales of new homes increased 20.7% in March—the fastest pace of growth seen since August of 2006 amid a housing boom. Existing home sales declined in March, though not for lack of demand. The drop was largely due to a shortage of inventory.
New Home Boom Continues
The increase in new home supply does not show any signs of slowing down despite a shortage in lumber which caused prices for new homes to increase by an average of $35,000 over the past year. US housing starts, which measures the number of new construction projects in the residential market, increased by close to 20% in March.
New homes may not be on the top of homebuyers’ lists as they seek out more established neighborhoods or coveted school districts. Nevertheless, as home prices surge, often new homes are comparatively more affordable. Homebuilders are responding by increasing construction to meet this new demand.
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