New construction homes are continuing to grow in popularity, largely due to a lack of older homes on the market.
In the fourth quarter, 31.8% of single-family homes for sale were new construction, according to a Redfin report. That’s down just slightly from last year’s high of 31.9%.
Prospective homebuyers are seeking new construction more often for several reasons. New home construction has grown significantly since 2009, now that the effects of the Great Recession have finally lessened. The pandemic also gave rise to a new build craze as mortgage rates hit all-time lows.
“Newly built homes are selling quickly right now because builders are offering such good discounts,” said Heather Mahmood-Corley, a Redfin Premier real estate agent in Phoenix.
“I recently had a buyer who wasn’t interested in a new construction home, but the builder offered such a good rate—5.25%—that they couldn’t afford not to take it. Another one of my buyers got a $10,000 credit for closing costs from a builder.”
Due to high interest rates, fewer homeowners put their home on the market last year, leading to less inventory for buyers. Buyers had to opt for pricier new construction homes instead.
New construction homes may be more readily available, but they’re also costlier. About 42% of new build homes sold in 2022 for $500,000 or more.
To combat high new construction prices, make sure you’re securing the lowest interest rate possible on your home loan. Head to Credible today to compare rates from multiple mortgage lenders at once.
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Mortgage rates are dropping, but not by much
Mortgage rates have dropped from their nearly 8% high, but they haven’t dropped as much as buyers would like. Estimates have put rates below 6% by the end of the year, but they currently sit in the mid-6% range.
“Homebuyers may be feeling like the lower mortgage rates they’ve been promised in 2024 are not materializing,” Bright MLS Chief Economist Lisa Sturtevant said in a MarketWatch interview.
Rates haven’t gone down as much as anticipated, in part due to the state of the economy. Inflation still remains high, so the Federal Reserve has yet to reduce rates.
“The strong job market is good news for the spring buying season, as higher household incomes are a necessary component, but it also means that mortgage rates are not likely to drop much further at this point,” said Mike Fratantoni, Mortgage Bankers Association chief economist.
If rates drop, this doesn’t signal the end of high home prices. In fact, lower rates create a more competitive housing market, which often means sellers list their homes for more.
If you’re looking to purchase a home, consider visiting Credible to find the best mortgage rate for your financial situation and prequalify within minutes.
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Homeowners insurance rates are still high
Homeowners insurance rates are up around the country. The average annual premium sits at $2,417, but certain states average close to $6,000, a MarketWatch study showed.
And insurance rates don’t show any signs of falling. They’re influenced by repair costs, which are still high due to the repercussions of inflation. Costs of materials and labor are on the rise to keep pace with inflation, which means higher costs for insurers when homeowners make claims.
Additionally, parts of the country are facing higher levels of natural disasters, which also increases the number of claims insurance companies face. To handle the high level of payouts, insurers often raise premiums.
Areas particularly prone to natural disasters have seen insurers pull their coverage entirely. This increases demand for the remaining insurance companies, who may raise rates in response.
Comparing multiple insurance quotes can potentially save you hundreds of dollars per year. Get a free quote in minutes through Credible without affecting your credit score.
2023 WAS THE HOTTEST YEAR ON RECORD, DRIVING UP UTILITY COSTS AND HOMEOWNERS INSURANCE PRICES
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