The traditional price gap between new and existing houses, once in the tens of thousands of dollars, has all but disappeared.
Normally, newly constructed houses carry a price premium over existing houses. But in the second and third quarters of last year, the median sales price of resale properties actually exceeded that for new houses, according to data compiled by the National Association of Home Builders (NAHB).
In the fourth quarter, though, the numbers switched back with new houses commanding a price premium on the median of $9,100. But the difference was just $9,100, or $419,200 for new houses versus $410,100 for existing ones.
For all of last year, the new house bounty was even lower, at $8,725. To put that into a historic perspective, the premium in 2003 was $33,750. And for the 10-year average, it was $60,657.
The reason for the shift appears to be two-fold: One, home sellers continue to capitalize on rising prices and the lack of listings for sale, while two, builders are consciously trying to build smaller houses on smaller lots and otherwise hold the line on prices.
New home prices have declined year-over-year for seven consecutive quarters, according to NAHB economist Onnah Dereski. In Q4 of 2024, the median declined by 0.95% from the same period a year earlier.
At the same time, existing home prices have increased year-over-year for six straight quarters. In 2024, the median was up 4.8% from 2023.
Another factor is the shift in the main focus of builders toward the South, where because of more lax regulations and other policies, it is less expensive to erect houses. Some 63% of all new houses sold last year were in the South, compared to 44% of all existing houses.
The new home price premium was most pronounced in the Northeast, where land isn’t as plentiful and construction rules are more rigorous. There, new houses sold for $310,900 more than existing places. In contrast, the South saw little difference with a modest $10,400, much like the national trend.
Uniquely, the pattern was reversed in the West, where existing homes were $72,600 more than new places.
