|October 25, 2017|
|Redfin New Construction Report: Under Building of New Homes and High Construction Costs Are Perpetuating Housing Shortage|
Redfin releases new datasets on new construction prices, sales, inventory and building permits for metros and counties across the U.S.
SEATTLE--(BUSINESS WIRE)-- (NASDAQ: RDFN)-- The average price of a new construction home that sold from July through September was $374,000, according to a new quarterly analysis on the new construction market from Redfin (www.redfin.com), the next-generation real estate brokerage. Redfin found new construction homes sold at an average premium of $87,000 in the third quarter compared to existing homes. New home prices were up 3.3 percent year-over-year compared to existing home prices, which grew by 7.9 percent in September.
In conjunction with the release of its inaugural quarterly report on new residential construction, Redfin is making monthly data on new home prices, sales and inventory, as well as building permit data from the U.S. Census, available on its Data Center. The downloadable datasets are available at the national, metro and county levels, going back to 2012, and will enable consumers, researchers and the media to study the new construction market, analyze average construction costs and compare the number of units built per capita across regions. Redfin will update the Data Center and report on new construction trends on a quarterly basis.
The Redfin analysis found new homes represent a growing share of the market over the past five years—rising from one in 13 homes for sale in September 2012 to one in eight homes in September 2017. However, housing starts—the number of new residential homes that have begun construction—are still 22 percent below their long-term average.
Single-family building permits, which offer a look at the new home pipeline, were up 9.7 percent year-to-date through September compared to last year. More than three-quarters of the nearly 100 metro areas Redfin tracks had positive growth in the first eight months of the year in single-family permits compared to last year. New permits for multi-family units (buildings of five or more units, including both apartment and condo developments) were down 3.6 percent year to date.
“After almost a decade of underproduction, we are finally seeing a slow, steady increase in single-family housing starts, up 9 percent from a year ago,” said Redfin chief economist Nela Richardson. “But high building costs are limiting the construction of homes that today’s buyers can afford. This is why even in the midst of extreme inventory shortages for existing homes, new homes are sitting on the market instead of selling.”
The national average cost to a builder constructing a new home—which includes the estimated cost of labor plus materials—was $240,000 for single-family units in August this year, which is the highest since the Census began reporting this in 1988.
Construction costs are rising in part because the availability of construction workers is still 25 percent below the peak in 2006 and there is also less competition among homebuilders. Housing material costs have also been rising, with lumber prices recently hitting their highest level on record since January 2003.
“We would love to build more affordable starter homes, but when high-end homes cost the same to build and are far more profitable, we lose the incentive to build smaller units,” said Isaac Stocks of Azure Northwest Homes, a Seattle-area home builder.
Metro-Level Highlights for New Construction in the Third Quarter:
To read the full report, complete with data visualizations and downloadable datasets, please visit: https://www.redfin.com/blog/2017/10/heres-the-1-reason-its-so-hard-to-find-an-affordable-home.html.
Redfin (www.redfin.com) is the next-generation real estate brokerage, combining its own full-service agents with modern technology to redefine real estate in the consumer's favor. Founded by software engineers, Redfin has the country's #1 brokerage website and offers a host of online tools to consumers, including the Redfin Estimate, the automated home-value estimate with the industry's lowest published error rate for listed homes. Homebuyers and sellers enjoy a full-service, technology-powered experience from Redfin real estate agents, while saving thousands in commissions. Redfin serves more than 80 major metro areas across the U.S. The company has closed more than $50 billion in home sales.For more information or to contact a local Redfin real estate agent, visit www.redfin.com. To learn about housing market trends and download data, visit the Redfin Data Center. To be added to Redfin's press release distribution list, subscribe here. To view Redfin's press center, click here.