Can Buyers in the U.S. Get a Better Deal on Newly Built Homes Now?

If you’ve ever wished to live in a house where no one has cooked a meal or taken a bath before you, 2023 may be your year. Newly built homes grew to represent an increasing share of homes for sale in the U.S. this year up to a record high of 29% of single-family listings during the third quarter of the year, according to Redfin real estate brokerage.

The higher percentage of newly built homes, which varies by market, is a function both of increased building over the past few years and the dearth of existing-home sales as homeowners hold back from selling during the current market slowdown.

For buyers, there may be opportunities to take advantage of the buildup of new construction, though sellers—including builders—still have the upper hand in many hot markets. In Boise, for example, 33% of homes on the market were new construction during the third quarter, according to Redfin.

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“Even though there’s been a lot of building around Boise and the market has slowed a little since mortgage rates went up, there’s still only 2.5 months of supply of homes,” said Tracy Kasper, owner of Berkshire Hathaway HomeServices Silverhawk Realty in Boise. “In the upper price range, there’s only a two-month supply.”

A balanced market between buyers and sellers translates into about a six-month supply of homes, which means that if the pace of sales stays the same and no new properties are listed, all available homes would be sold in that period.

The U.S. continues to have a shortage of housing. The National Association of Home Builders (NAHB) estimates that at least 1.5 million housing units are needed to meet demand and bring the housing market into balance.  

Still, the availability of newly built homes can benefit buyers in some circumstances.

Buying Incentives for New Homes

Nationally, the market slowdown due to higher mortgage rates, recession fears and inflation has impacted builders. In November, 36% of builders offered price reductions and 59% offered other incentives to buyers, which is relatively high and has been increasing since July, according to the NAHB. However, this is below the peak of 59% of builders offering price reductions in October 2007, as the housing market began to collapse.

“In the Raleigh [North Carolina] market, we have more newly built homes available now and 37% of new single-family homes have sold for less than the asking price in the past 90 days,” said Deb Brown, a real estate agent with Century 21 Triangle Group in Raleigh. “But some of this may be due to the fact that it’s the end of the year and builders are trying to get inventory off their books.”

On the other hand, 28% of newly built homes sold for more than the asking price in the Raleigh market, Ms. Brown said. Whether a price reduction is available depends on the specific house, community and builder.

“Usually, builders are much less likely to offer a price reduction and are more willing to offer really great incentives to buyers instead,” said Carol Wolfe, a real estate agent with Coldwell Banker Realty in Houston.

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The most common incentives builders offered in November, according to NAHB, include discounting the price or accepting a reduced profit margin; closing cost assistance; reduced or no cost upgrades; and mortgage rate buy downs. 

The percentage of homes for sale that are new construction is higher in areas with more available land, but some larger metro areas have also seen new construction build up compared to a year ago, according to Redfin’s report.

For example, in the Washington, D.C., metro area, 14.5% of homes on the market were new construction in 2022 compared to 11.1% in 2021. Boston also saw an increase from 7.7% in 2021 to 12.3% in 2022. In Miami, the percentage of newly built homes declined slightly from 6.3% in 2021 to 5.7% in 2022.

Similarly, the percentage declined in New York City from 5.1% in 2021 to 4.8% in 2022 and in Los Angeles from 4.2% in 2021 to 3.7% in 2022. 

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Be Bold, But Don’t Expect to Get a Steal

Whether you’re looking in a market with a large or limited supply of newly built homes, real estate agents say you can negotiate with the builder.

“Be brave and ask for a price reduction—all they can do is say no,” said Ms. Kasper. “But typically, it’s better to negotiate on financial incentives, upgrades or a landscape package.”

Buyers who are looking for a steal aren’t getting one, said Sam Huff, manager of Berkshire Hathaway HomeServices Silverhawk Realty in Boise.

“The market is normalizing, not crashing,” Mr. Huff said.

How much you can negotiate depends on how badly the builder wants to sell.

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“Buyers have the most negotiating power when builders have a move-in ready house without a contract or the model home and they want to sell it,” Ms. Wolfe said. “It all boils down to motivation. If a property has been sitting on the market longer than a builder wants, that’s the best time to negotiate.”

The best deals are often found when a development is nearly complete or if you’re willing to buy a less desirable lot, said Ms. Brown. At one development in Raleigh, a builder offered to waive the $35,000 lot premium for the buyers and offered a $25,000 design center credit on an $800,000 house, she said.

“Builders need to get homes sold, but they are looking to reach a particular profit, too,” said Ms. Brown. “They don’t want to cannibalize their own neighborhoods by lowering the price.”

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Go for Homes That Are Complete or Nearly Complete

Typically, builders offer the most incentives on homes that are complete or nearly complete, said Ms. Brown, such as $10,000 or $20,000 in closing cost credits depending on the home price.

“The easiest incentive to ask for is a rate buy down,” said Mr. Huff. “Many smaller builders have good lender partners that can work with you to get a better rate. Non-conforming jumbo rate loans are already 0.5% to 1% lower than conforming rates, so if you get the builder to also buy down your rate, that can be a good opportunity.”

A mortgage rate buy down can be temporary and reduce your mortgage rate by 1% or 2% for the first year or two or it can be a permanent rate reduction, typically 0.5% or 1%.

One thing Mr. Huff doesn’t recommend is making an offer contingent on the sale of your home, especially if it’s out of state.

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“Builders won’t accept that because it’s out of their control,” Mr. Huff said.

A mortgage rate buy down, closing cost assistance and reduced financing fees are the most likely options that builders will consider, said Ms. Wolfe.

“You can often get builders to include a landscape package as an incentive, which means a lot on a one-acre property,” Ms. Kasper said.

As inventory increases, some of these incentives are offered or can be negotiated even before construction has begun, Ms. Wolfe said.

“If a builder has homes available on the ground now, you can ask for all of it: a landscape package, financing help and upgrades,” Ms. Wolfe said.

Depending on the market, you may be able to get everything you ask for—but not necessarily a price reduction, too.

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