They're Practically Giving Houses Away

Not really. They're still crazily unaffordable. But you probably get a better deal with new construction.

I’m not going to post a chart of housing affordability; as a renter, I would just trigger myself and never finish this post. Houses are expensive, especially where I live (Connecticut) because there often isn’t really a way to build new ones. With supply mostly static, and prices high, transactions of existing homes have been falling. I’m showing the national picture below; regionally, in places like Connecticut the picture is even more stark.

Sales of newly constructed homes, though, a smaller segment of overall home sales, have been relatively robust.

The reason for this is because homebuilders will pay you to buy one of their newly constructed homes.

These lines can’t go up forever — homebuilders won’t build houses and give them to you for free. There is a limit to the size of incentives they’ll give a buyer. When that limit is reached, the homebuilders will have to either accept fewer new home sales (less revenue) or lower their prices. And if new home prices start to fall, I would imagine that existing home prices would follow.

In the meantime, new houses will be relatively more affordable than existing ones. In places like where I live, that doesn’t matter because there aren’t any new houses. But in places where they can build, this will put pressure on existing home sellers to compete on price. Maybe I should move to where they’re building houses.