A third of homes for sale are new construction 

The housing inventory crunch, while showing signs of easing slightly, continues to put pressure on home prices. And as mortgage rates remain elevated, large numbers of homeowners, influenced by the mortgage rate lock-in effect, are staying put, limiting the supply of existing homes. 

But builders are continuing to deliver new homes, even as confidence has slipped recently. A Redfin report found that in the first quarter of 2024, the share of new homes remained remarkably high, with new builds representing a third of all single-family homes for sale. 

New construction is plugging the inventory hole: In Q1, 33.4% of all homes for sale were new construction, Redfin researchers said — roughly the same percentage as a year ago, and just shy of the record high in early 2022 when 34.5% of all homes for sale were new construction. 

The current share is nearly double pre-pandemic levels, when new construction made up closer to 15% of all homes for sale. The report attributed the jump in market share to the surge in new home construction at the onset of the pandemic and the more recent decline in existing home supply. 

But some economists say the pace of construction still isn't keeping up with demand. In response to the latest data on housing starts, NAR Chief Economist Lawrence Yun remarked that "the housing shortage is not going away," noting that more new homes are needed "to truly bring about a balance in the housing sector."

What agents are seeing: "Buyers are having a hard time finding single-family homes in their budget because not many homeowners are letting go of their houses, and those who are listing tend to price high because they haven't come to terms with the fact that prices have come down from their 2022 peak," Nicole Dege, a Redfin Premier agent in Orlando, said in the report. 

"Builders have a better understanding of the current market, so they're pricing fairly, offering mortgage-rate buydowns and providing other concessions to attract buyers."

Builder confidence has been mixed: According to surveys from the National Association of Home Builders, confidence among builders has ebbed and flowed this year. In March, the organization reported that builder confidence was at its highest level since last summer, but more recently, that enthusiasm ticked down slightly as borrowing rates and construction costs remain high. 

The supply of new homes is healthy: Demand may be outpacing supply overall, but new home inventory is in much better shape than existing home inventory. Redfin noted that in March, the supply of new homes was 8.3 months, compared to only 3.2 months for existing homes.

According to U.S. Census data reported in March, sales of newly built homes came in at a seasonally adjusted annual rate of 662,000 in February and the median sale price for new homes was $400,500 — down 7.6% compared to the same time a year prior.