The premium for buying new is fading fast. The price gap between new and existing homes just hit a record third-quarter low, and builders are doubling down with incentives that lower mortgage rates and reduce upfront costs.
New-construction homes appear to have the edge in the South and West in particular, where the price per square foot is lower for a new build than an existing home, according to the New Construction Insights Q3 2025 report from Realtor.com®.
“Builders have a good amount of spec inventory that they are trying to move right now as the market cools down both seasonally and in terms of price and sales growth,” says Joel Berner, senior economist at Realtor.com. “Quick move-in inventory is readily available, and builders are cutting prices and offering incentives to get it sold.”
The report reveals that new-construction listings have rebounded since inventory was depleted in 2021 and 2022—when mortgage rates were at historic lows, and buyer activity elevated.
Currently, mortgage interest rates are 6.26% for the week ending Nov. 20, according to Freddie Mac. Rates have hovered closer to the 6% mark for several weeks, even falling to 12-month lows, but it hasn’t been enough to sway homebuyers.
Active listings rose 15.3% year over year in October, marking the 24th straight month of gains. The number of homes for sale topped 1 million for the sixth consecutive month, according to Realtor.com data.
The median list price for a newly built home across the country comes in at $451,337 (third quarter), which is up 0.2% from the previous year.
But in the new-home construction space, the South and West stand out with more activity. Both of those markets are better supplied, and price reductions are much higher. Compare that to the Northeast and Midwest, where new-home construction listings and price reductions are lower.
“A lot of people think new construction is more expensive than buying an existing home, but in Los Angeles, the cost to build actually comes out to about half the price per square foot to purchase a home,” Sean Phillips, founder of Otto ADU, tells Realtor.com. “It can be a great investment if people are willing to wait.”
Builders have had to deal with labor shortages and new tariffs on construction materials, which has affected their bottom line. But to move inventory, they’ve offered more incentives.
“Waiting for a home to be completed can be well worth it since the long-term cost of operating a new home can be meaningfully lower than buying an existing home,” says Whitney Hill, a licensed general contractor, former Realtor®, and now real estate investor. “Further, a new home can be customized to the buyer’s preferences. Also, depending on the build type, the total wait time over the course of owning the home could be very little.”
Markets like the South and West have a more robust supply and higher price reductions, while in regions like the Northeast, where new construction is a somewhat rare commodity, new-home price reductions are much less common.
The report found that in the South and West, where inventory has mostly recovered to pre-pandemic levels (due in part to builders delivering plentiful and affordable homes in those regions), new builds have a single-digit price premium and all homes have a higher rate of price reductions.
Compare that to the Northeast and Midwest, which is home to most of the hottest and most seller-friendly markets in the country, where new construction is still a scarce premium product.
“Now, new builds are price-competitive with existing homes and actually more affordable on a per-square-foot basis,” says Berner. “In a market where affordability is the top concern, new homes are priced to sell, and they also offer attractive financing that lowers the burden of the two most onerous parts of buying a home: the down payment and the monthly payment.”
Tom Labelle, founder of Stillwater Custom Homes, adds that while the upfront costs of building can be comparable—or sometimes higher—than purchasing an existing home, homeowners gain the ability to put their budget toward the features, systems, and performance that actually matter to them.
“They aren’t paying for outdated layouts, aging infrastructure, or upgrades they don’t want,” he says.
Buyer incentives
Builders are offering incentives such as reduced rates—which were the most common promotion listed on Realtor.com.
Also, mortgage rate buydowns and below-market mortgage rates are an effective way to attract buyers to new construction.
“Builders who are holding inventory are offering actual incentives to clear the homes from their books,” says Hill.
“Oftentimes, these incentives are decisions made well after the quality of the home has already been locked in, so buyers may actually just be getting a high-quality home for a lower price because of the current market conditions,” says Hill.
In the third quarter of 2025, the average 30-year mortgage rate listed on the deed of an existing-home buyer was 6.26%. For a new-home buyer, the average 30-year rate was 5.27%, 99 basis points lower.
“Builders do take a hit with these incentives. They are costly marketing tools, but often they’re a better alternative to leaving a house unsold,” says Berner.