New House Prices have dropped below Existing Homes for the first time in history

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For the first time on record, buying a brand new home costs less than buying an older one. New homes are at $402.6K while existing homes sit at $406.1K, flipping a trend that’s literally never happened before.​

Builders have way too much inventory sitting around about 9.3 to 10 months worth compared to the normal 5-6 months. This is killing them. Construction loans are expensive and sitting vacant homes are bleeding cash so they’re getting aggressive with incentives. PulteGroup one of the biggest builders out there, is now spending $52,200 in incentives per home sale that’s 8.7% of the home price just to move units. Where’s all that money going? Mostly into mortgage rate buydowns where the builder essentially pays your interest upfront to dramatically lower your rate. They’re getting buyers from 6.5% down to 4%, and in some crazy cases even below 1%

Meanwhile, existing homeowners are completely locked in. Over half of American homeowners locked in mortgage rates below 4% during the pandemic when rates were historically low. Today’s rates are sitting at 6-6.5% so if you sell your old house and buy a new one, you’re potentially doubling your monthly payment. One federal analysis estimates this lock in effect has literally prevented 1.72 million home sales since 2022, people would rather stay put than face that rate hit. With so few existing homes actually coming on the market, sellers have pricing power and aren’t budging on price.The inventory of existing homes is sitting at only 4.4 months of supply compared to builders’ nearly 10 months.​

What this really means is builders are in a completely different fight than sellers of older homes. Builders need to move volume and are willing to use financing creativity to make it happen. Buyers shopping for new should absolutely look at this, you’re getting a modern home with a warranty, no maintenance issues and incentives that can genuinely make your effective cost lower but it also shows how distorted the housing market has become.