Housing Market Warning: New Home Supply Hits Critical Level!

In March of 2025, we had approximately 119,000 new homes unsold sitting on the market. That's the highest level since 2009 when the housing market was melting down. Now, in many areas of the US, there's still a tight supply of homes for sale, like here in central Ohio. However, many other areas of the US are seeing rising home inventory. A lot of it's driven by new home construction. For example, if you look back just at the year 2022, we only had 32,000 new homes unsold on the market. Now, that number is 119,000. Hey, if you're new to the Housing Nerd channel, welcome. My name is Jason Ferrier. I've been a realtor and investor in central Ohio for the past seven and a half years. As I'm sure you can guess, today's all about new construction and stay tuned to the end because I'm going to give you the things to look out for as a new home buyer that could wreck your buying experience if you're not careful. The fact is, in many parts of the US, builders are really just sitting on unsold inventory. Other areas, like here in central Ohio, we're seeing building continue and homes are actually selling. When you look here, I'm going to pan around. Look down there. All of these homes are pretty much sold in this D.R. Horton community. It's really market-specific what you're going to see. Comment below and let me know, do you think we have an inventory shortage or is that just a narrative hyped up by realtors like me? Tell me the truth in the comments. I won't get upset. We're using an article from Resi Club Analytics to help us break down some of this information. According to the article, home builders are saying this spring is definitely slower than other springs and that contributes to the dead inventory. Now, the home builders are adding incentives to their already discounted prices to get buyers to bite on these new homes. Yet, as you can see behind me, they're still building. For example, Lennar, one of the large builders in the US, is now spending 13% of the average sale price of a new home on incentives. On a $400,000 home, that's about 52 grand. The builder incentives can include everything from rate buy-downs to special fixed interest rates like you see right now on your screen, to even special giveaways like granite countertops or upgraded floors. Really, they want to do everything they can except actually lower the price of the home. Comment below, tell me if that's what you're seeing in your market and what you think about it. These special incentives don't lower the home price, so they're not lowering the actual revenue, but what they are doing is they're cutting into builder profit margins. You can see that on the chart right now. You can see how builder profit margins from some of the largest builders in the US have definitely shrunk over the past year or so. One of the developments that I'm at today is Willow Bend, outside of Columbus, Ohio, in a small town called Granville. In this market, we need affordable housing, no doubt about it, as do many other areas of the US. I'm not telling you anything you don't know, but here, we seriously lack new construction, new homes. Not every area is overflowing with new construction, but in this development, homes range from a low $400,000 to the high $500,000 range. You can see they're offering incentives. I'm looking at it right now. They're offering $10,000 on quick move homes. This home behind me is listed for about $560,000. It's one of their quick move-in homes. It looks like they're offering a fixed low interest rate in the low 5% range for 30 years, which is definitely an incentive when normal 30-year fixed mortgage rates are hovering anywhere from 6.5% to 7%, sometimes even more. Many consumers are complaining out there saying, hey, it's wrong of the builders to actually keep the prices high, but then offer incentives to actually get buyers to buy. But again, comment below. I want to know what you think about that. Hey, a quick break from today's video to remind you to like this video and subscribe to The Housing Nerd. So where are the builders having the toughest time selling their homes? New home inventory has shot up in the Sunbelt areas. Many of these markets in Florida and Texas are now above 2019 levels when it comes to total supply of housing. And so one of the contributing factors to that are new homes, because in the Sunbelt areas, builders built many more new homes than they did in areas like the Midwest or especially the Northeast. And according to the Resi Club article, builders are cutting their prices the most in Florida. It's basically their softest market. So if you're looking for a home, especially a new home in the Sunbelt areas, you should have a lot more luck versus your counterparts up where I live here in the Midwest or definitely out in the Northeast. The new home builder pain is definitely more prevalent down South. For example, check this out. In Sarasota, Florida, BR Horton's offering up to $87,000 in incentives. And you can see it right on the screen. They're offering a fixed rate of 4.99% for 30 years. That's significantly lower than the current interest rates now. They're also covering all the closing costs. But in places like I live, like here in the Midwest, builders still have a lot more power than a lot of the buyers because the incentives, you can see them. I already showed you the incentives in Ohio, lower than the incentives in Florida. Why is that? Well, the inventory of homes for sale in the Midwest and a lot of the Northeast is still below pre-pandemic levels. Like here in the Midwest, we're still down in some places as much as 40% below pre-pandemic levels. And the Northeast is even tighter. They're in the neighborhood of 50% below pre-pandemic levels. So these tighter markets really haven't had to offer the same incentives as other markets have in the South and the Gulf area, even out in the mountain area, we're seeing a larger supply of homes for sale. One of the things we're also seeing is that as these new home communities go up and more new supply of homes hits the market, the existing homes around it need to compete with these new home incentives in order to sell their house. There aren't a lot of existing homeowners who are willing to offer money at closing to buy down an interest rate to 5% for 30 years. And so if I'm selling a home right around the corner from this, I definitely have to sharpen my pencil with my listing price. I may not be able to get as much as I usually would for my house when a new home building site pops up just around the corner from me. Because pricing folks in real estate is all about supply and demand. The more supply, the lower the price is normally. The higher the supply, the lower prices. But I'm curious to know, have you bought a new home? I've never purchased a brand new home before. I've had clients buy them, but I've never purchased one myself. And I'm curious to hear your experience. If you're getting ready to buy a new home, this next section is for you. One of the things that stands out to me as soon as I go to a new home development is the dust and dirt. I mean, there's a lot of people that live just next door to what I was just showing you. And there is dirt, dust, and grime everywhere. And there's a lot of homes still left to be built. So that's not going to end for a long time. And that's something to think about if you're looking to buy a home. Now, if you're thinking about buying a new home, listen up. There's some things you definitely have to consider. Depending on where you live in the US will probably dictate what type of deal you can possibly get. So that's my first tip is negotiate hard. Do not settle for the first offer. Do not settle for what they're showing on their website. Compare different builders, shop around, look at a ton of houses. The more houses you look at, the better. Now, a lot of these builders, like we saw today, are offering great incentives on the surface, but you always pay for it somehow. So when you look at a new home and you see a great incentive on there, like a low, low interest rate or free granite countertops, really look at how much value you're getting and where that money is going to be spent. For instance, you could possibly end up buying an existing house, pay actually less money in the long run because you may be overpaying for the new house, even with the low interest rate, but the price may be higher than an existing house. Now, that's not always the case, but make sure you compare existing and new homes. Now, one of the things a lot of folks make the mistake of doing is going in to a new home development without a realtor. And a lot of people think, hey, I'm going to get a discount because I'm not using a realtor. However, a lot of home builders don't play like that. They won't give you a discount if you don't bring your own representation. So as a buyer, you deserve independent representation. So find a great realtor that specializes in new homes. Now, the other mistake I see people making, you can see it all over TikTok right now, it's really prevalent, is buyer's remorse with new homes because they didn't have them inspected properly. And I'm not talking about one inspection, you should do a home inspection at multiple stages of the building process, because just because it's a new home doesn't mean it was built well. There are buildings I own as rental properties that were built in 1900, 1890, and those things are solid as a rock. They've got stone foundations that look like something out of ancient Egypt. A lot of the new homes are built fast and sometimes built with low quality. So make sure you do inspections. And if you see something that's not right, say something. So that goes into my next tip with buying new construction. You want to make sure that you read every document available to you from the builder, read all the fine print. Because going back to my last point, if you find something in an inspection, you want to understand what you may lose if you walk away. So know that before you sign. Also realize you're going to live in a construction zone for a while, probably, right? I just told you how dirty and grimy a lot of construction sites are. And so as a new homeowner, you're going to live in that dirt and grime until the development is finished. The biggest tip I have is regarding taxes. When you first buy a home like the ones behind me, you're paying taxes, property taxes on the dirt. You're not paying it on the building because right now the county auditor has this as vacant land. So your taxes look low. So when you look at that initial payment, even with the special interest rate that these builders are giving away, you want to ask, does that payment include property taxes and insurance? And pay special attention to those property taxes. Once the county auditor and school system realize that you bought a house that actually has a structure, guess what's going to happen? Your taxes could go through the roof. And oftentimes they have to be caught up from the arrears of the escrow. Meaning if you didn't pay the full property tax on the house with the land for the first year you lived in it, once the county auditor understands that you bought the house last year, guess what? They're going to want you to make up those taxes. And so your payment could double or even triple. And there's story after story on social media about buyers who now have buyer's remorse and have to sell their property because they miscalculated their property taxes. Let's be honest, nothing smells as good as a brand new house and brand new construction. So when you're in there and you've kind of got what I would call the winery effect, where you're kind of drunk with just awe and ooh and possibilities, look at that payment and realize that may not be the payment that you're going to pay for the next 30 years. So all you have to do is look for any homes that were completed in that community in the last few years and now examine what taxes they are paying. Make sure they're in the same school system as what you're buying into. And then use your realtor. Ask them, tell them this is a concern of yours. You want to make sure that you understand the actual payment. Lean on your realtor for that. And a lot of this stuff, right? Tell your realtor your concerns. Show them this video if you want and tell them, hey, these are my concerns. I want to make sure these aspects are covered. That's why you're paying a realtor. Now, this is all about new homes today, but if you want to keep your finger on the pulse of the entire housing market, do yourself a favor and check out my Redfin video. You can look at it right now.