Understanding Why New and Existing Home Prices are Moving Differently

Recently, you might have noticed that new homes and existing homes seem to be priced differently, despite both types of homes being in high demand. There’s a fascinating reason behind this trend, and it boils down to economics, market supply, and recent policy changes.

Currently, new homes represent the highest share of monthly home sales since the financial crisis, but surprisingly, there's also an unusually high number of new homes on the market. Typically, an abundance of homes would mean lower prices, and indeed, median prices of new homes have slightly declined year-over-year. This price drop is partly due to builders creating smaller, more cost-effective homes to counter rising construction costs.

On the flip side, existing homes continue to get more expensive. With fewer existing homes available for purchase, competition among buyers increases, driving prices higher. Additionally, as tariffs and immigration restrictions have made building new homes costlier and slower, many homebuyers are shifting toward existing homes, further intensifying the competition.

Understanding these trends can help you make smarter decisions in today’s housing market. If you’re considering investing or purchasing, weighing the immediate affordability of new homes against the quick equity growth potential in existing properties can help you choose the best path forward.