The price of a newly built home is now an average of $3.50 per square foot less expensive than an existing home nationwide, according to Zillow. It’s the biggest discount in six years and it’s significantly more in the D.C. area.
The cost difference in the D.C. metro is $48.30 per square foot for newly-built homes versus existing homes in May, the fifth-largest discount among metros. San Diego has the biggest discount, where newly-built homes are an average of $57.10 less expensive than existing homes, according to Zillow.
New homebuyers have a big advantage, including no need for updates or repairs.
It is a big reversal compared to pre-pandemic sales when new construction was $15 to $22 per square foot more expensive. New builds have only been less expensive per square foot than existing homes five other months since the start of 2018.
Price per square foot does not mean new construction is less expensive overall. In May, Zillow said new-build properties sold for $54,000 more than existing homes, but builders are offering more price cuts than homeowners selling their own properties. About 29% of new homes saw a price cut in June, and 61% of builders are now offering incentives other than price cuts, including mortgage rate buy-downs and covering closing costs.
Existing homebuyers still have some advantages. Today’s new construction buyers are getting significantly smaller lots, while the lot-size advantage for existing homebuyers is growing.
New homebuyers are also getting smaller homes, an average of 355 square feet smaller than existing homes, and new builds are an average of 185 square feet smaller than they were in 2018.
Existing home prices have still risen more, up 52% since before the pandemic, compared to 26% for new construction.
Another reason for the gap in new versus existing is the drop in newly-built condos and townhomes, which now account for 3% of new construction, compared to 10% in 2018. Condos are significantly more expensive per square foot than single-family homes.
The new versus existing discount is not universal. In addition to D.C. and San Diego, Salt Lake City, Los Angeles, and Austin all have new build discounts of between $48 and $57-per-square-foot. New construction is still more expensive in half of the top 50 metros.
Below is a chart, by metro, of new versus existing cost-per-square-foot in May, courtesy of Zillow:
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