For most of the last 50 years, new homes have cost more than existing ones, nationally. Thanks to builder strategies, shifting home designs and a new construction glut the trend has flipped.
Something bizarre is happening in the U.S. housing market. At the national level, new homes are selling for less than existing ones.
In June, the median existing home sold for $441,500, while the median new home went for $401,800. Since 1968, 690 months in total, new homes have only undercut existing ones 22 times. From June 1982 to May 2024, it happened just twice, and the 1990s never saw the inversion happen at all. Yet, since May 2024, this flipped market has popped up seven times, happening every month from April through June of this year, the latest data we’ve got. June’s gap was a record-breaker: new homes sold for 9% less than existing ones, smashing the previous record 3% discount.
When an economist sees numbers that look backward, the instinct is to look for what’s missing. Eric Fox, chief economist at Veros Real Estate Solutions, a firm that provides housing market analytics and forecasting, puts it this way: if a chart doesn’t make sense, there’s usually a hidden variable that explains it. That’s to say, the numbers aren’t as odd as they look once you find what’s going on under the surface.
A good place to start is to look at the particulars, if only to understand what isn’t happening.
Kevin Weingarten has a buyer under contract for a three-bedroom, two-and-a-half-bath townhome in Chalfont, Pennsylvania. It’s 30 miles from Center City Philadelphia; take Route 611 and you’re there in about 45 minutes, a manageable but not always pleasant commute. Far enough from Trenton, the closest New Jersey Transit station to New York City, it avoids the long-distance commuter crowd, keeping the price down.
Built by Foxlane Homes, the 2,000-square-foot unit has the open kitchen-and-living setup buyers want. Use the builder’s mortgage and title company, and they’ll toss in a deck and a finished basement. No luxury here—basic cabinetry and flooring, everything upgradable—but it’s new, clean, and in the Central Bucks School District, a big draw for families. Sales price: $620,000.
Weingarten, 52, has been selling homes in the Philadelphia suburbs for 13 years, after spending years as a project manager for a builder, giving him a clear-eyed view of both sides of the housing market. He says good luck finding a comparable resale closer to Chalfont. Existing townhomes, when they pop up, sell 10% to 15% cheaper than new construction. But they’re rare, and inventory stays tight.
That’s what you’d expect. All else being equal, a new home next to an existing one will almost certainly cost more. New homes command higher prices with their quartz countertops, brand-new appliances, fresh paint, and none of the carpet stains or musty smells that can haunt a resale.
So if there isn’t a sudden preference for old over new, and real estate agents like Weingarten say there isn’t, then what explains the anomaly in the aggregate, national level data?
The first clue has to do with what builders are doing.
The National Association of Home Builders (NAHB) says that since June 2024, 60% of homebuilders were using sales incentives, and 30% lowered their prices. Incentives can mean interest rate buy-downs, help with closing costs, or free upgrades that lower the effective price without changing the sticker.
Existing homeowners are making concessions too, though less often. Redfin, the online real estate brokerage, found that nearly 40% of home sales in the first quarter of 2025 involved sellers covering something, whether repairs or closing costs. In practice, that means the median sales price of new homes understates the actual discount, because many concessions don’t show up in the data.
The “freebies” haven’t hurt big builders.
The SPDR S&P Homebuilders ETF, which tracks companies like Lennar and NVR, is up 12% this year, beating the S&P 500’s 10% gain. Publicly traded builders are still making money, even with the concessions, though most are seeing their gross margins compress. Meritage Homes ($5.3 billion market cap) has gone from a 29% gross margin in 2022 to 25% last year, while NVR ($22.8 billion market cap) saw a 2% decline in gross margin since 2022. KB Home ($4.2 billion market cap) experienced a 3% decline, and Lennar ($33.3 billion market cap) a 5% decline over the same period.
Tighter margins might stem from builders focusing on smaller homes, which enable more units to be built on any given plot of land.
The average new home has shrunk by nearly 400 square feet since peaking at 2,736 in 2015. At about 2,300 square feet, the average today is back to levels last seen during the aftermath of the Great Recession. Builders are targeting affordability, putting up smaller homes, townhomes, and condos. That pulls down the median sales price even if the price per square foot continues to steadily rise from about $127 in 2016 to $231 today.
“Builders overbuilt during the pandemic,” says Daryl Fairweather, chief economist at Redfin. Builders don’t have the luxury of sitting on 4% mortgages like those who bought homes from 2011 through 2022 do. They need to move inventory, so they cut prices and offer deals to get homes off their books and into the hands of people willing to pay today’s 6%+ mortgage rates. That makes builders more flexible on price than you or I.
Lawrence Yun, chief economist at the National Association of Realtors, says that existing homeowners are up 49% since before the pandemic. That equity and homeowner’s clinging to their existing sub-4% mortgages makes them reluctant to cut their asking prices. Instead, they stay put, limiting supply. Inventory for existing homes is about four months, while new home inventory was more than double that in June, Yun says.
Builders, facing that supply glut, have had to adjust. More incentives and aggressive pricing are the result. Existing owners, locked into cheap mortgages, are sitting tight. The odd price inversion is the byproduct.
There’s also a demographic wrinkle, Veros’ Fox says.
In 1981, the median homebuyer was 31. Today it’s 56. That shift changes what people want. Buyers in their 50s and 60s may be ready to downsize, but they aren’t looking for three-story townhomes squeezed onto small lots. Because the lots are smaller, builders build up, which means more stairs. Many older buyers prefer single-story houses in established neighborhoods, with more space outside and fewer steps inside. That makes older homes more appealing.
Another piece of the puzzle is who’s doing the building. Reena Agrawal, senior research economist at Veros Real Estate Solutions, notes that large national builders have more room to cut prices or offer incentives than smaller firms. And the market has tilted in their favor.
The National Association of Home Builders reports that the top ten builders accounted for a record 44.7% of all new single-family home closings in 2024, up from 8.7% in 1989 and 31.5% in 2018. That concentration means the median price now reflects what big, high-volume firms are doing, not small local outfits, and those firms can afford to sweeten deals in ways others can’t.
Can the new vs. old anomaly persist? For now, yes. Builders still have stock to move. New home inventory, measured in terms of months of supply, sits at 9.2 months, more than 3 months higher than the average going back to 1963. They’ll keep offering incentives. New homes will continue to be smaller. Economists say that could keep the inversion going for another year or two. But over time, today’s new homes become tomorrow’s existing housing stock. Unless house sizes keep shrinking, the numbers must converge.
“Builders have a strong incentive to adjust,” says Fox. “Once they clear inventory, they’ll be able to charge higher prices.”
That’s the key point. This won’t be the new normal. New homes can’t stay cheaper than existing for long. They’re new, after all, and buyers will still pay a premium for that. Still, it’s worth paying attention now, because this odd split says a lot about where supply is coming from and how builders are reshaping the market.
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Source: https://www.forbes.com/sites/brandonkochkodin/2025/08/27/heres-why-old-homes-suddenly-cost-more-than-shiny-new-ones/
