Sales of new-construction homes as a share of all single-family home sales grew in the fourth quarter despite record-high construction costs, according to a report by Redfin.
New-construction homes made up 16.4% of all single-family home sales, increasing from a 14.2% share in the same quarter a year ago. The sales growth comes despite new homes being more expensive than existing homes. While single-family homes sold in the fourth quarter had a median price of $377,800, new-construction homes sold at an average premium of $86,400.
"New homes are more expensive than existing homes, and their prices tend to grow at a slower rate," Redfin Chief Economist Nela Richardson said. "However, new homes' slower price growth belies their advantage to buyers in the hottest markets. Buyers in these highly competitive markets have been attracted to new construction as a way to avoid bidding wars. They often find it's easier to negotiate with a single builder than to compete with several buyers and negotiate with a traditional seller."
The high price of new homes reflected increasing construction costs. The fourth quarter posted a 1.2% year-over-year increase in the estimated labor and materials cost of constructing a single-family home to $244,000.
In spite of the increase, there were 1.3 million new residential homes that began construction in January, representing a 7.3% year-over-year gain.
In Raleigh, N.C., 31.2% of all homes sold over the last three months were new construction, the highest share among metros. Austin, Texas, and Nashville, Tenn., followed at 26.3% and 26.1%, respectively.
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