Recent data from the Census Bureau and the National Association of Realtors highlights an intriguing trend in the housing market: new homes are now edging out existing homes in affordability.
In May, the median price for a newly built house was reported at $417,400, slightly lower than the median price of $424,500 for existing homes sold during the same period, as per NAR data. This reversal, where new builds cost less than existing homes, has been a rare occurrence, observed only in 14 months since 1968, with the most recent instances in 2021 and twice since 1982.
While the methodologies used to collect these figures differ, they underscore a notable shift. New home prices have seen a decline from their peak of $460,000 in October 2022. Builders have responded to the challenging market conditions, characterized by historically high mortgage rates, by constructing smaller, more affordable homes to align with buyer budgets.
Conversely, existing home prices have surged to record highs, fueled by constrained inventory due to sellers hesitating to list their homes amidst the elevated mortgage rates. This scarcity has intensified competition among buyers.
Robert Frick, corporate economist at Navy Federal Credit Union, remarked on this housing market dynamic, describing it as “a sign of how contorted the housing market is.” The current affordability advantage of new homes over existing ones reflects the broader complexities and challenges shaping the real estate landscape.
As the market continues to evolve, prospective homebuyers may find building a new home from scratch a more cost-effective option amidst these shifting market dynamics.
