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New homes haven’t been this cheap since 2021. Buyers are starting to take notice.
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After years of hot inflation, it’s hard to find much of anything for sale at 2021 prices. That is, unless you’re looking for a newly built home.
The median new construction home sold for $387,400 in March, the lowest level in nearly five years. Prices have fallen 6.2% in the last year, even as older homes are still slowly appreciating.
The price relief for new construction buyers comes as builders continue to adjust to the housing market’s affordability problem. Many are slashing prices to compete in high-supply markets in the Southeast and Mountain West, and building smaller homes with simpler finishes that are in reach for more budget-conscious buyers.
“We know that there’s pent-up demand for home buying, and I think that builders have the tools to be able to bring some of those buyers off the sidelines,” said Odeta Kushi, deputy chief economist at First American.
So far, those efforts seem to be working. New home sales reached a seasonally adjusted annual rate of 682,000 in March, up 3.3% from a year earlier. New homes that sold for between $300,000 and $400,000 make up the largest segment of the market, but in recent years, sales at the sub $300,000 level have been gaining steam. They now make up 18% of the market, up from 14% in 2023.
Brandon Archie, a Realtor in Maple Grove, Minn., has watched builders aggressively expand in the outer suburbs of Minneapolis-St. Paul in recent years, while inventory of older homes has lagged far below pre-pandemic levels. Purchasing an existing home usually takes patience and beating out multiple offers, which is why several of his clients relocating to the area have recently opted to buy new.
“If you take a $500,000 existing home, more than likely in our market, there are going to be multiple offers, which is going to drive that price up,” he said. “Buyers end up having to do things like either putting more money down or waving a home inspection — just anything to be competitive in that market.”
Buying new in the area, though, tends to be easier, especially if buyers are willing to consider an already completed home. Buying one can mean substantial savings, although it means buyers give up customizations. One client who recently purchased one of those homes received $15,000 off the list price, plus $5,000 for closing cost assistance or an interest rate buydown.
“It’s a pretty good mix of people choosing to go to new construction versus existing,” he said. “Once you get to a certain price point, kind of like that $500,000 price point, it almost becomes cheaper to buy new construction.”
