New homes are now cheaper than existing ones — here’s why - video Dailymotion

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00:00Traditionally, new construction homes cost more than existing homes.

00:04However, those prices inverted in 2024 and have lasted through the first half of 2025.

00:09So what's causing this phenomenon?

00:11And what does it mean if you're looking to buy or sell a home?

00:17Let's take a look at the numbers.

00:19In July 2025, the median price for existing home sales was $422,400,

00:26according to data from the National Association of Realtors.

00:29Meanwhile, the median sale prices for new homes sold in July of this year was $403,800,

00:36according to the federal government, a more than $18,000 difference.

00:41Straight Arrow News spoke with Chen Zhao, head of economics research at Redfin, who says

00:45the prices between new builds and existing homes are beginning to converge.

00:50One reason for this is that builders are constructing smaller homes.

00:53According to Federal Reserve Economic Data,

00:56the median size of a new house was 1,970 square feet in June 2020.

01:01By January 2025, that number dipped to 1,792 square feet.

01:07And in July 2025, that number was at 1,852 square feet.

01:12Builders are offering buyers more concessions,

01:14and homeowners with existing properties are not willing to sell their properties at lower rates

01:19and even delisting them from the market altogether.

01:21So that's, I think, what we're seeing happening right now is that most builders are out there

01:28willing to make concessions of various types, including, you know, mortgage rate buy-downs

01:33or closing costs, you know, credits.

01:36But a lot of them are willing to just drop the price right now, whereas existing homeowners are not.

01:41And materials to build new homes aren't cheaper.

01:44So why are builders able to offer lower prices?

01:47Zhao says it's because builders have larger profit margins post-pandemic.

01:51And builders are sitting on a lot of inventory.

01:54So according to the Census Bureau's latest report, there's 9.2 months of supply in new construction right now.

02:02So that is a lot.

02:03That's very elevated compared to typical levels.

02:07So builders are very incentivized to move this because even if they have to accept a lower profit margin,

02:13that's better than having that inventory sit with them because they need that money in order to keep investing in their business.

02:20Meanwhile, sellers are not as motivated unless they have a life-changing event forcing them to sell their home.

02:26According to the Kobesi letter, 55 percent of homeowners have mortgage rates below 4 percent,

02:31and 21 percent of homeowners have rates below 3 percent.

02:34Most homeowners don't want to lose their lower rates.

02:38Zhao says builders can see what's happening.

02:40They have a ton of inventory, and so construction of new homes will begin to cool off.

02:45In fact, it's already happening.

02:47We're already seeing that there's much less, you know, construction in the pipeline.

02:52So builders are seeing what's happening.

02:54They know that they're sitting on too much inventory right now.

02:56So we know that starts and permits are down.

02:59And so if we're looking into the future, there will be less new construction.

03:05But this doesn't mean that home prices across the board will drop.

03:08Zhao says home prices are currently growing slower than inflation.

03:12We do expect that overall home price growth for all houses to be pretty flat.

03:19Like, you know, 0 percent, maybe slightly negative, maybe slightly positive, but pretty flat, right, in the near future,

03:25probably like towards the end of this year.

03:27And good news for future buyers.

03:29The Fed is expected to make rate cuts in September.

03:32So if you've been looking to make that big purchase or put your current home on the market,

03:36you should do it when it feels right and you have everything in order,

03:39not when you think you're going to time the mortgage market.

03:42I think that if you're trying to get into the market right now,

03:46you need to be looking at, you know, what are my, you know, personal needs?

03:51How much can I afford?

03:52You don't need to try to time mortgage rates.

03:55You know, timing mortgage rates is something that Wall Street traders do.

03:58It is very, very difficult to do.

04:00It's much better just to find the house that is right for you.

04:03Make sure you can afford it with a little bit of cushion because the economy is getting weaker right now.

04:09For Straight Arrow News, I'm Lauren Keenan.

04:11If you want more on this story, download the Straight Arrow News app or visit san.com.

New homes are now cheaper than existing ones — here’s why

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