Competitive Pricing In Newly Built Homes Reduces Affordability Gap with Existing Homes

According to the latest report from Realtor.com®, homes that are newly constructed are becoming more competitive in pricing compared to existing homes. Released on November 25, 2025, the New Construction Quarterly Report highlights a significant trend: the price gap between these two categories of homes has narrowed to the lowest level ever recorded in the company’s data history.

Historically, newly built homes tended to carry a premium over existing ones, but recent incentives from builders are reducing this burden. These measures include lower mortgage rates and flexible financing options, making new constructions more accessible to buyers. In fact, new homebuyers recently benefited from mortgage rates averaging 5.27%, while existing-home buyers faced rates around 6.26%. This almost full percentage point difference represents the widest gap in years, showcasing the effect of targeted builder incentives, particularly during the late summer period.

Incentives are crucial in easing the financial pressures that many buyers currently face, such as high monthly payments and substantial down payments. Realtor.com®'s Chief Economist, Danielle Hale, noted that builders are actively responding to market demands and buyer concerns by offering compelling new construction options. Particularly in the South and West regions of the United States, where new homes are more abundant, individuals can find greater pricing flexibility combined with attractive incentives, compared to limited options and higher prices in regions like the Northeast and Midwest.

Builder Incentives and Their Impact on Affordability

The strategies being deployed by builders, such as mortgage rate buydowns and below-market financing, significantly impact home affordability. In the third quarter of 2025, new constructions not only boasted lower average down payments (15.7% versus 17.8% for existing homes) but also offered buyers modern amenities and energy efficiencies.

With monthly payments on new constructions hovering closely around existing homes—about $30 higher—homeownership is increasingly within reach for many prospective buyers. However, these incentives may come with certain trade-offs. Joel Berner, senior economist at Realtor.com®, cautions that while accessing favorable financing might help buyers initially, it also leads to higher financing amounts and financing more of the purchase, which can heighten the risk of being underwater if property values decline.

Market Dynamics: Pricing Trends and Regional Variances

As for pricing, the median listing price of newly built homes remained stable at $451,337 in the third quarter of 2025, a slight year-over-year increase of 0.2%. Conversely, the prices of existing homes climbed to $409,667—a 1.6% increase compared to the prior year, showcasing a continued upward trend.

When adjusted for size, new constructions, which generally offer larger spaces, have been more affordable on a price-per-square-foot basis for the majority of the past year. This is primarily seen in the South and West where new development is robust. However, stark regional differences remain. In areas with tight inventory, such as the Northeast and Midwest, new constructions tend to hold a significant premium.

Inventory Levels and Price Adjustments

The report also highlights an increase in housing inventory, partly due to a higher volume of existing home listings over the last two years. As a result, newly built homes accounted for 16.7% of all homes available for sale as of Q3 2025, a decrease from the peak of 22.4% recorded earlier in the same year.

Notably, the price premium attached to new constructions has dropped to 10.2%, marking a record low. The pricing strategies employed by builders vary significantly by region, with lower premiums observed in areas where new home supply is thriving. As a result, price reductions have reached an all-time high, with 15.1% of new construction listings experiencing cuts in costs during Q3 2025.

Conclusion

The shifting landscape in home construction shows promising developments for buyers navigating today's market. By leveraging incentives in a competitive pricing environment, newly built homes are not only addressing affordability issues but also appealing to a broader audience of homebuyers across the United States. For those interested in purchasing, the time may be ripe to explore these new options versus existing homes as the market continues to evolve.

Methodology: Data presented in this article reflects Realtor.com® housing data as of September 2025. Listings include newly built single-family homes, condos, townhomes, and co-ops. The data extends back to July 2016. Mortgage rate and down payment statistics are sourced from Realtor.com®'s public records database.

About Realtor.com®: With over 25 years at the forefront of online real estate, Realtor.com® connects buyers and sellers with essential tools and insights, recognized as a leading resource by real estate professionals. The platform is operated by Move, Inc., a subsidiary of News Corp.