The number of homes for sale that haven’t even been built yet is now at its highest level on record. Here’s what homebuyers need to know about this trend


What to know if you’re buying a house that hasn’t been built yet

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You have bought a house, but it is not yet built? Although it sounds strange, it is not a new problem, but it is becoming a more common situation, as the demand for housing is up and the supply is down. (See the lowest mortgage rates you might qualify for here.)

According to the latest data from the US Census Bureau, the number of new homes available for sale rose 3.8% in March to 407,000 units. More than half of this increase is attributable to homes for sale whose builders have not even started construction. That number now stands at its highest level since the government started collecting such data in 1999 – 105,000 in March, down from 97,000 the previous month and 77,000 the same month last year, according to seasonally adjusted preliminary figures .

“While we expect higher mortgage rates to increasingly weigh on sales, demand still appears to be outpacing the speed at which homebuilders can complete construction, with many homebuilders continuing to report that ‘they are limiting the number of orders accepted,” Mark Palim, deputy chief economist at Fannie Mae, wrote in a statement.

Although builders are struggling to keep up with demand, sales remain steady each month as buyers are ready to invest in a new construction home now rather than waiting to see what the market does later. “These are signals that people expect things to get more unaffordable,” Hamilton Fout, vice president of economic and strategic research at Fannie Mae, told MarketWatch Picks. “People look at what’s available to buy because they think if they don’t buy now, they’ll pay later.”

See the lowest mortgage rates you could qualify for here.

If you are interested in buying a house now and you are or have already bought a house that has not yet been built, here are some things to consider

1. Meet the whole team

It’s understandable that when you’ve bought a new home, the only thing on your mind is getting into it so you can finally decorate it and make it your own. But it’s important to not only be patient, but to make sure you get a home to your specifications with no shortcuts. Go on site and meet the team that manages the construction of your new home on the ground. Get to know the project manager and the super. These connections will only help you have candid conversations about the build as it progresses.

2. Have a nest egg for temporary accommodation, if you need it

If you’re lucky enough to have family – blood or chosen – that you can stay with until construction is complete, take advantage of the offer of free or reduced rent where possible. But keep in mind that the market is unpredictable, and even experts can’t say for sure when or if housing prices and rents may change. If construction is taking longer than expected and you need to find other ways of living, make sure you have a little nest egg for a temporary rental if you need it.

See the lowest mortgage rates you could qualify for here.

3. Have it inspected – twice

For new construction homes, it’s a good idea to have two inspections: first during construction before the drywall is hung, so that framing, electrical wiring, and plumbing can be properly inspected; and second, when the house is finished and before moving in. You may need to do a little extra work to complete this first inspection (hire the inspector, line up with the builder for the inspection), but work with your contractor/builder so you have peace of mind when your house is finished.

4. Do your own inspection

There’s nothing wrong with walking around the property while it’s under construction and noticing the visual red flags. You may not be an expert, but if something doesn’t seem right to you, it’s worth asking the builder. After all, it’s your house.

5. Create a detailed final score list

Before you close, make sure the developer gives you a final tour of the property so you can make a to-do list. This checklist must be completed before closing, and it cannot be added afterwards, so make sure it is as detailed as possible. You can also hire an expert of your choice to do the tour with you, as this is your last chance to sort everything out before closing time.

But should you buy now? The pros say, don’t be pressured into buying when you’re not ready. “The very high rent growth figures make buying real estate very attractive for investors,” Fout said. “But as mortgages go up, people may pull out of the market, in which case you might find it relatively easier to buy.”

See the lowest mortgage rates you could qualify for here.

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