Sales have surged for new single-family homes, rising more than 20% in August compared with 12 months ago, according to the latest data from the US Census Bureau.
The spike in new home transactions, which represent 14% of America’s real estate market, has been ignited by builders offering discount deals to lure buyers who’ve been waiting for borrowing costs to fall.
New single-family homes are now selling at the fastest pace since 2022.
Their popularity has become the brightest spot in today’s current housing market.
Meanwhile, owners wishing to sell, together with first-time buyers, continue to show a reluctance to transact until retail mortgage rates fall from their current levels of around 6.3%. As a result, the market is in a temporary holding pattern.
The latest Freddie Mac survey has found the average rate for a 30-year mortgage edged down to 6.26% in mid-September, sustaining a trend of small incremental decreases in loan servicing costs.
With the Federal Reserve finally cutting its federal funds rate guidance by 0.25% – the first reduction in 10 months – it’s clear buyers of new homes want to capitalize on available discounts before they disappear when the market bounces back.
The Fed has now reduced its cash rate guidance from 5.5% in August 2024 to 4.25%, which is a conservative trend compared with Canada, where rates are now 2.5%.
If you’re looking to purchase a new home and capitalize on builders’ discounts, here are some tips:
Specialized agent? – Some agents focus on helping folks buy a new home. They know most, if not all, the local developers and their reputations. Many will also secure financing for you. That said, most Realtors know the entire market and will be able to guide towards the best home for your needs.
Finance – A Zillow survey last year found 49% of buyers worked with the builder to secure finance. It’s often a condition of securing discounts. Work the numbers so you know you’ll get all the available discounts but not get stuck with an expensive loan. Your agent should help you.
Location – This is a critical element in your decision to buy a new home. Many developments will not always have easy access to key facilities and mass transit. Older homes have the advantage of being in established areas. Choosing your location will have a fundamental impact on the future value you secure from the property.
Choosing a builder – After location, this is arguably your most important decision. Reputation is everything, and you should only select a builder with a great track record. Always ask for site references, and don’t be afraid to visit the homes they have built.
Building options – We can choose to purchase a “move-in ready” home where everything has been done for you. Alternatively, you may go down the path of a semi-custom home where there are pre-set features such as flooring, but you can design your own kitchen or bathroom. Otherwise, you can call in an architect and build your own fully customized dream home.
Build your budget – There are multiple stages to finalising your budget. It’s a good idea to get a rough cost of the home you’d like to buy. So, work with the builder on desirable floor plans and work out a rough cost. Then, approach your lender to secure the finance. Make sure you have the money to cover the cost of construction, or you’ll be asking the builder to pare back features and fixtures.
Contract review – Builders and developers will usually have watertight contracts. However, you must have your own lawyer review the contract so you are aware of the terms and conditions. Pay attention to the choice of materials and finishes, and the payment schedule. Don’t get blind-sided.
Inspections – Agree before the contract signing on the number of inspections you will be allowed. Ensure you can visit at vital stages of the construction process. Also, it’s essential you have a final walkthrough of the finished home before closing.