In a clear sign of the times, Zillow has announced a partnership to syndicate new-construction listings on Redfin.
This means home shoppers will see more new builds than they did in the past, at a time when existing housing supply has rarely been lower.
It also means home builders will gain even more exposure, further boosting their already-high market share.
Once launched, Redfin will source non-MLS new-construction listings exclusively from their competitor Zillow.
And any new-construction listings that are available through an MLS will continue to be discoverable on the Redfin platform.
Zillow and Redfin Linkup a Boon to Home Builders
Zillow apparently has the largest selection of new-construction communities of all real estate U.S. websites.
This seems to be due to their existing partnerships with home builders, whereby they advertise their properties on Zillow.
To broaden their reach, these listings are slated to be syndicated to Redfin starting in the fourth quarter of 2023.
And Redfin users will get to take advantage of new features designed specifically to discover new-construction communities and connect with home builders.
Powered by Zillow’s Community pages, they’ll list all available homes for sale within the community, along with their amenities.
Shoppers will be able to view move-in ready homes, nearly complete homes, and even lots.
Those interested will find a direct link to the home builder’s website, along with pertinent contact information and sales center hours.
New Home Sales Up Big Year-Over-Year
The U.S. Census Bureau recently reported that sales of newly built single‐family houses climbed to a seasonally adjusted annual rate of 697,000 in June 2023, up an estimated 23.8% from a year earlier.
Meanwhile, the seasonally‐adjusted estimate of new homes for sale at the end of June was 432,000, which represents a 7.4-month supply at the current sales rate.
That’s down from 448,000 a year earlier, when supply stood at 9.5 months.
At the same time, Zillow reported that there were 28% fewer new listings in June compared to a year ago.
And Redfin noted that about one-third of all single-family homes available for sale were new construction, which is apparently a record-high share.
As you can see from the chart above (from early 2022), newly-built homes saw their market share rise from around 21% in 2019 to 34.1% by the end of 2021.
It appears their market share has climbed even higher since then, as existing supply continues to be hard to come by.
Where Did Existing Home Supply Go?
The National Association of Realtors (NAR) reported that there were just 1.08 million unsold existing homes at the end of June.
That was down 13.6% from a year ago when there were about 1.25 million existing homes available.
This represents a 3.1-month supply at the current monthly sales pace. Interestingly, it’s up slightly from 3.0 months in May and 2.9 months in June 2022.
As for why, demand is also low, mainly because housing affordability is so poor at the moment.
Between much higher mortgage rates and all-time high home prices, there aren’t many willing and able buyers out there.
Still, inventory remains in short supply, especially due to the mortgage rate lock-in effect. In short, existing owners are staying put because of the stark difference in interest rates.
Even if they’re able to sell their home and buy a replacement at today’s rates, going from a 2-3% rate to a 7% rate isn’t ideal for anyone.
Home building has also lagged for many years, so inventory wasn’t great to begin with over the past decade.
This explains why the median existing-home price was $410,200 last month, the second-highest price of all time and just shy of its record-high $413,800 in June 2022.
Home Builders to the Rescue
To help alleviate this supply and demand imbalance, home builders have been stepping up their game.
They’ve been offering both temporary and permanent rate buydowns to ease affordability concerns.
And because they often have their own financing departments, they’re able to get creative and really push down rates.
While someone purchasing an existing home might be subject to a 6-7% mortgage rate, the home builders could be able to offer a 5% mortgage rate.
This is a huge advantage for builders. Additionally, they don’t have to worry about a seller finding a replacement property.
As such, there’s no mortgage rate lock-in to worry about, nor is a contingent sale necessary.
Collectively, this may explain why the market share of new homes has increased so much. And why Zillow and Redfin want more new home listings on their platforms.
So if you’re a prospective home buyer, don’t be surprised if you see more and more newly-built homes versus existing homes in your searches.
Read more: Should I buy a new home or an old home?
