A lack of inventory and an affordability crunch since the pandemic have affected the housing market in many ways, few of them positive for buyers. But one interesting dynamic remains pricing between new builds and existing homes—with existing homes historically much cheaper.
Despite a welcome surge in inventory overall, the price of a new build continues to hover close to existing housing stock, according to new data from Realtor.com®.
“New construction continues to play a critical role in expanding housing options and easing affordability challenges for buyers. Builders are responding directly to market conditions and the financial barriers buyers face, from high monthly payments to large down payments, and are creating compelling opportunities to shop new homes in today’s market,” said Realtor.com Chief Economist Danielle Hale in a statement.
The report shows that a nearly 1% gap in the mortgage rate that buyers are getting with new builds is driving the shift, with monthly payments for new construction now only $30 more than mortgage payments on an existing home.
“Builders’ incentives are giving buyers great deals on mortgage rates, but there are tradeoffs,” said Joel Berner, senior economist at Realtor.com, in a statement.
The median listing price for newly built homes this past quarter was $451,337, holding steady year-over-year (up 0.2%) and down (4.0%) from the 2022 peak. Meanwhile, existing-home prices continued to rise, reaching $409,667, up 1.6% year-over-year and 3.9% above Q3 2022.
The report affirms a longer trend going back years, as the number of new-home sales also rose as builders pumped out inventory in the high demand market. As demand has slowed, both sales and new builds appear to have somewhat plateaued—but the Realtor.com report shows that in terms of raw cost, new homes are still an option for buyers on a budget, at least in some regions.
“In parts of the South and West, where new construction is more plentiful, buyers are seeing the greatest pricing flexibility and incentives, while in the Northeast and Midwest, new homes remain a more limited, premium option,” Hale said.
The Realtor.com report notes that the new-construction price premium also fell last quarter, to 10.2%. Builders are pricing “aggressively” in the South and West, the report says, while in the Midwest and Northeast, new homes are still more of a “premium product” compared to existing homes.
Nationwide, 15.1% of new homes saw price reductions—an all-time high, according to Realtor.com.
Berner cautioned, though, that the decision on what kind of house to buy is a complex one, and even someone looking purely to save money needs to be aware of other factors—in particular, that purchasing a new build often means financing more with low down payments.
“When buyers pay closer to full price and put less money down, they finance more of the purchase, which raises the risk of ending up underwater if home values fall. Even with today’s improved affordability in new construction, it’s important to weigh these incentives against their longer term financial picture,” he said.
