New Homes Shine in Current Housing Market

Despite challenges in the housing market, new homes are emerging as a bright spot in 2024. The SPDR S&P Homebuilders ETF (XHB) has seen a 10% increase in value since the year began, reflecting the growing demand for new housing options.

One of the key factors driving this trend is the reluctance of existing homeowners to sell, largely due to high borrowing costs. Many are holding onto their homes, locked into low mortgage rates, which has resulted in a shortage of available properties for sale.

According to Rafe Jadrosich, a senior homebuilders analyst at Bank of America Securities, approximately 80% of homeowners with mortgages are currently paying rates below 5%, significantly lower than the current 6.75% rate. This discrepancy has led to a situation where newly built homes now account for a much larger share of available listings than usual.

Historically, new homes have represented about 10% to 15% of total active listings. However, Jadrosich notes that currently, new homes make up around 30% of listings, highlighting their increased importance in meeting housing demand.

The shift towards new homes playing a more significant role in the market is a notable development, indicating a change in buyer preferences and market dynamics.