Should You Consider Buying a Newly Built Home?

If you're considering purchasing a property, you may be concentrating on previously owned properties. Yet with so few homes on the market right now, it makes sense to think about all your possibilities, including a newly constructed home.

The Number of Newly Built Homes Is on the Rise

Even though there are currently more homes for sale than there were at this time last year, there are still historically few residences on the market. Years of underbuilding, in which not enough new homes were constructed to meet demand, are one factor in this.

The graph up top demonstrates how little new housing has been produced during the last 14 years. But it also reveals another crucial development: an increase in the number of new houses being constructed annually. That's good news for purchasers, as First American Chief Economist Mark Fleming explains:

“While existing-home inventory remains limited, the silver lining for home buyers is that new-home inventory is on the rise, and a new home at the right price is a pretty good substitute.”

Builder Incentives Can Provide a Boost

“The builders have to work off the backlog of homes, but instead of 3%-4% mortgage rates, they’re dealing with 6% plus mortgage rates, which means they have to provide many incentives to make sure those homes sell.”

“The National Association of Home Builders reported that nearly two-thirds of builders were offering incentives, including mortgage rate buydowns, paying points for buyers and price reductions, which could entice potential home buyers.”

“A one-percentage-point decline in mortgage rates has the same impact on affordability as an 11 percent decline in house prices.”