New Homes Have Been Selling at a Discount Relative to Existing Homes
Prospective purchasers who presume that newly constructed homes exceed their financial capacity may discover more favorable circumstances than anticipated. Newly constructed homes currently represent superior value compared to pre-existing residences on a national scale, and within approximately one-third of significant metropolitan regions.
Newly constructed homes commanded a median price of $205 per square foot during July, which falls below the $212 median observed for pre-existing homes. This represents a departure from preceding years, during which newly constructed homes consistently sold at elevated per-square-foot rates relative to pre-existing homes across 77 of 84 months spanning 2018 through 2024. The per-square-foot price differential favoring new construction reached its maximum at $25 in November 2022.
Newly constructed homes have been transacting at reduced rates relative to pre-existing homes throughout 17 of the preceding 19 months, with builders demonstrating increased willingness to reduce pricing and extend buyer incentives to facilitate inventory liquidation. The most substantial reduction materialized in June, reflecting a $12 per-square-foot discount.
This comparative reduction in newly constructed home pricing typically manifests most prominently in regions where construction activity accelerated substantially during the pandemic expansion period, particularly throughout the Sun Belt region. The most pronounced discounts are evident in Austin, Texas (19.3% per-square-foot price reduction), Raleigh, NC (14.4%), San Diego (14.4%), and Tampa, FL (12.4%). Discounts intensify within these markets as heightened competition incentivizes builders to develop more economically accessible residences and present enhanced incentive packages to consumers.
The inverse dynamic applies in jurisdictions where new construction remains constrained, notably encompassing the New York metropolitan area (64.9% per-square-foot price premium), Cleveland (50.7%), Milwaukee (46%), and Detroit (44.5%). In regions where inventory availability remains restricted and new construction encounters substantial regulatory or logistical obstacles, builder portfolios concentrate on premium offerings and command corresponding price premiums.
Examining Affordability, Size & Region
Contemporary residential construction demonstrates a notable paradox: newly built dwellings are characteristically smaller structures situated on reduced lot sizes, yet this architectural shift toward more economical and densely developed housing does not account for the decreased cost per square foot. In fact, this transition toward more accessible, higher-density residential options should theoretically increase the per-square-foot expense, as smaller residential units distribute fixed expenditures such as kitchen and bathroom facilities across a diminished square footage.
This phenomenon indicates that supply constitutes the fundamental determinant. According to data from the U.S. Census Bureau, the inventory of new residential properties reached 9.6 months in July 2026, representing an increase from 7.6 months merely two years prior and substantially exceeding the approximately six-month supply documented in July 2018 and 2019. Elevated levels of available inventory are motivating construction companies to implement reduced pricing strategies and supplementary incentives, including mortgage rate reductions.
Conversely, the permitting process has decelerated, suggesting a constrained development pipeline in the forthcoming period. Although the new home inventory substantially surpasses pre-pandemic benchmarks, the resale housing market presents a contrasting situation, with existing home inventory remaining 17.1% beneath pre-pandemic levels. Sellers of established residences typically maintain advantageous financial circumstances, having accumulated considerable home equity throughout the pandemic period and secured fixed monthly mortgage obligations at historically low rates near 3%.
Consequently, resale property owners face diminished motivation to reduce their asking prices, particularly given that numerous sellers retain the alternative of converting their properties into rental units should they fail to obtain satisfactory purchase offers.
Nationally, newly built homes account for 12.6% of all home sales over the 12 months ending July 2026. That’s the same share as in 2019, representing a return to pre-pandemic norms after peaking at 16.7% in 2023.
The share of new home sales over the past 12 months varies widely by market, ranging as high as 37.1% in San Antonio, and as low as 2% in Hartford. Compared to 2019, new construction has captured a growing share of the market in major Texas metros. The share of sales made up by new homes is up 12.9 percentage points in San Antonio, 7 points in Dallas and 6.8 points in Houston. Markets where new construction has lost share since 2019 are led by New Orleans (down 17.7 percentage points), Baltimore (5.8) and Atlanta (5.7).
To read more, click here.
