Prices for newly built homes fell in nearly a third of major U.S. cities over the past year, as builders ramped up concessions and focused on smaller floorplans in the face of weak demand.
Nationally, median list prices for new homes registered $450,797 in the second quarter, little changed from a year ago, according to the Realtor.com® economic research team’s latest New Construction Quarterly Report.
At the metro level, new-home prices are falling fastest in Little Rock, AR, where the $321,520 median list price is down 15.6% from a year ago.
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Following Little Rock, the markets with the biggest annual price drops for new construction were Austin, TX (-8.5%); Wichita, KS (-7.9%); Jacksonville, FL (-7.8%); and Cape Coral, FL (-7.4%).
“Even with recent slowdowns in starts and permits, builders continue to deliver new homes to the market at a healthy pace,” said Realtor.com Chief Economist Danielle Hale. “In many areas, these homes are not only available, they also offer better value compared to existing home inventories.”
All told, list prices for new homes are falling annually in 29 out of the top 100 metro areas by population.
Generally, markets with falling prices tended to be located in the South and West, where inventory has expanded dramatically and buyer competition for homes is less fierce.
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However, several major cities in the Midwest and Northeast did see falling new-home prices, including Chicago (-5%); Cleveland (-4%) and Philadelphia (-3.8%).
On the other hand, new-home prices are still rising in some areas where supply is constrained and demand remains hot.
Out of the top 100 metros, median list prices for newly built homes are rising the fastest in Syracuse, NY (+18.8%); St. Louis (+16.8%); Los Angeles (+16.1%); New Haven, CT (+13.7%); and San Francisco (+11.2%).
Price premium for new homes hits an all-time low
The report also found that the price premium for new-construction homes over existing homes has fallen to an all-time low of 7.8%.
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While new-home prices have remained roughly flat over the past year, existing-home prices have continued to set new record highs, jumping 2.4% annually to $418,300 in the second quarter.
While new homes typically cost more than existing homes, that premium is now at its lowest in records going back to 2016.
On a square-foot basis, new homes now actually tend to be cheaper than existing homes. Nationally, new builds typically list for $218.66 per square foot, compared with $226.56 for existing homes.
However, this affordability edge isn’t distributed nationally, and in many markets new homes remain more expensive per square foot than existing homes.
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The biggest discounts tend to be found in the South and West, where new homes make up a significantly greater share of for-sale listings, and weak demand has led builders to make price cuts.
“We’re even seeing new-home price declines in some of the most active pandemic-era hot spots, signaling a shift toward greater affordability in markets that were previously out of reach for many,” says Hale.