During the COVID-19 pandemic, rock-bottom interest rates sparked a homebuying frenzy as the national housing supply struggled to keep pace. The result? Soaring prices for existing homes coupled with record-low housing stock levels.
This shortage created an opening for new-construction homes in the housing market to meet demand and offer modern amenities, energy efficiency, and customizable features.
“There is a clear and present need for newly built homes to meet the demand for housing, and this construction is an important contributor to overall economic activity,” says Joel Berner, senior economist at Realtor.com®, in the September New Construction Report.
With that in mind, Realtor.com is presenting its Days of Deals, a limited-time browsing experience from Sept. 18 to Oct. 6, designed to help anyone interested in buying a home find builder promotions and incentives—all in one place.
In July, some buyers were able to save up to $50,000 when buying new homes, thanks to incentives such as appliance packages and $10,000 toward closing costs.
Certain regions of the U.S. are hot spots for new construction, particularly the South and West. In fact, in five states within these regions—South Carolina, North Carolina, Idaho, Arizona, and Florida—new-construction homes are priced lower per square foot than existing homes, making them particularly attractive to budget-conscious buyers.
Here’s more on the state of new construction today, plus how homebuyers can save a bundle on a brand-new home.
The state of old and new housing stock
The number of homes for sale has been gradually ticking up; but as of December 2023, the U.S. still faces a shortfall of 7 million homes. Levels of listings remain low because many homeowners simply aren’t selling (and then buying again) due to years of stubbornly high mortgage rates.
Recently, however, mortgage rates have dipped to their lowest point in over a year—and there’s potential for further declines.
But here’s the catch: Even if rates drop from the current 6%–7% range, many potential sellers remain anchored to the ultralow rates they locked in a few years ago, making them reluctant to list their homes. This ongoing gap means new construction remains critical in alleviating the housing crunch.
The Federal Reserve has issued its first interest rate cut in four years, kicking off an easing cycle that will make new mortgages more affordable.
Fed policymakers announced the half-point rate cut on Wednesday, bringing the central bank’s effective benchmark rate to about 4.8%, down from a two-decade high of about 5.3%. It marked the first rate cut since March 2020, and follows two years of elevated interest rates in the central bank’s fight against inflation.
The half-point cut is larger than the quarter-point markets predicted as little as a week ago, and signals that the Fed believes inflation has been vanquished, and is now focused on preventing a recession and major job losses.
“Rate cuts will have a mixed impact on new construction,” says Berner. “On one hand, buyers’ budgets will expand, and new builds that were previously unaffordable to the marginal buyer will get more attention than they did before. On the other hand, many homeowners with locked-in low rates have been waiting for a drop in rates to list their homes, so we’re likely to see a flood of existing homes hit the market, creating competition for new construction.”
Resale prices up, new-construction prices down
Once mortgage rates soften and homes hit the market, there will still be high home prices to consider.
“In August, the median listing price for a newly built home in the United States was $450,000, down slightly from July but down significantly from the $470,000 peak in July 2022,” says Berner. “Existing homes, on the other hand, peaked earlier this summer and have been trending upward over the past two years as they had historically.”
The median listing price for existing homes was $415,000 in June and fell to $400,000 in August.
Builders are turning to smaller homes
Builders are strategically addressing the affordability gap in the resale market, which has played a key role in stabilizing listing prices this year.
One factor driving the downward trend in new-home prices is that builders are focusing on smaller, more budget-friendly designs.
In 2022, the median size of a new build was 2,128 square feet, but by 2024, it had shrunk to 1,965 square feet.
Meanwhile, existing homes saw a slight increase in size, with the median rising from 1,770 square feet to 1,784 during the same period.
Another reason behind the drop in new-home prices is the strategic use of builder incentives.
“Builders are in a great position to adapt to the market, and they work with consumers to get cost relief in various ways, including cash-back options to help with down payments and rate reductions through preferred lenders,” says Cliff Johnson, vice president of New Homes and Rentals at Realtor.com. “Additionally, the long-term value of new construction is amplified by buyer savings due to lower maintenance costs and lower utility costs for new builds. These factors combined make it a great time to buy a new home.”
Where to find new construction
The South or West regions have the fastest-growing overall housing-stock levels for new construction.
While existing-home inventory has continually trailed the prepandemic period, new-home listings there have been steadily increasing since 2022, according to Berner.
“In January 2024, there were 20.3% more new builds on the market than in January 2020,” he says. “In August 2024, that level reached 30.3%. On the other hand, there were 25.2% fewer existing-home listings in January 2024 than January 2020.”
This surge in new construction has created a wealth of opportunities for homebuyers, especially in states where new builds are not only more plentiful but also more affordable than existing homes.
For prospective buyers interested in purchasing a newly built home, the 10 states above offer more newly built options that are more affordable and are growing the fastest. If you’re interested in checking new-construction opportunities and promotions in your area, check out Realtor.com Days of Deals builder promotions.