New Homes Cost 32% MORE than Resale
Historically, when comparing like with like, new construction as a rule costs more than existing housing. Through March, nationwide median single-family home prices on new housing were 32% more expensive than on resales.
While the cost ratio between new and existing single-family housing is in constant flux, March's figure is in keeping with 2021's and with changes over time. Prior to the Great Recession of 2008, new homes were priced 30% to 40% higher than existing homes. After that tumultuous period, with existing home prices dropping precipitously, new construction climbed to 50% more than resale prices.
It's important to remember that new construction typically accounts for only around 10% of homes sold on the market. However, as recently as this past December, with existing home inventories at an all-time low, new home sales rose to over 34% of total sales, the highest share on record.
Where the cost of new construction far exceeds resale
On the state level, Florida, the median cost for new construction in March rose to almost $400,000, compared with the average resale price of $325,000 for existing home sales. A stunning $75,000 OVER the price of an existing home.
Throughout much of the Midwest, there are also states — including Michigan, Wisconsin and Missouri — in which new construction costs exceeded resale's by at least $150,000. At the most extreme, in Iowa, the difference between new home construction ($344,000) and existing home sales ($153,000) was an extraordinary $191,000!
Looking for some perspective
The volatility in today's market for single-family homes affects the pricing of both new construction and existing homes, but in different ways. For most new construction, actual home selling prices can't be determined until homes are built, up to a year after initial payments are made. For resale homebuyers, price competition and the waiving of inspections and appraisal contingencies can significantly drive up home prices. These waivers also can impact the costs of repairs, home system replacements, remodeling and more.
While the higher costs for new homes over resales may remain relatively stable, the rising price of either continues to influence many potential homebuyers' decision-making.
Courtesy of BOA
