Price Gap Narrows Between Existing and New US Homes

Housing affordability remains a major concern, with developers now focusing on building smaller homes.

For sale sign in Washington on May 19, 2025. Madalina Vasiliu/The Epoch Times

The gap in prices between new and existing homes narrowed in the first quarter of the year, driven by factors such as tight inventory and elevated mortgage rates, the National Association of Home Builders (NAHB) said in a June 2 statement.

“The median price for a new single-family home sold in the first quarter of 2025 was $416,900, only $14,600 above the existing home sale price of $402,300,” NAHB said.

“The average difference over the last five years was $26,700, while the decade prior (2010-2019) saw a much wider gap of $66,000.”

Supplies of existing homes have tightened, pushing up their prices and contributing to narrowing the gap with new homes, according to the statement.

Many homeowners are deciding not to sell their properties amid high mortgage rates since selling now could force them to buy at higher current rates, it added.

The average weekly mortgage rate of a 30-year fixed-rate mortgage was 6.89 percent for the week ending May 29, according to data from Freddie Mac. This is much higher than the below-3 percent level four years ago in 2021.

In a Feb. 6 statement, real estate brokerage Redfin said that 82.8 percent of homeowners have mortgage rates below 6 percent, with 55.2 percent carrying a rate below 4 percent.

Homeowners with such low rates will inevitably be hesitant to sell off their properties, leading to a supply crunch in the existing home market and pushing up their prices closer to new homes.

As for the overall housing affordability challenges, homeowners are tackling them by building smaller homes, constructing on smaller lots, and providing incentives to prospective buyers, according to NAHB.

“Home builders are committed to ensuring everyone who values homeownership has the opportunity to attain a safe, affordable home,” said the association’s chairman, Buddy Hughes. “High construction costs and labor shortages continue to be challenges for the residential construction industry.”

Last month, Hughes said policymakers need to eliminate burdensome regulations, expedite approvals for affordable projects, and end tariffs on Canadian lumber and other construction materials, saying that such policies would allow developers to construct more homes.

Make $250,000 to Afford a Home

America’s housing affordability crisis is so severe that households making $100,000 a year are faced with limited options, the National Association of Realtors (NAR) said in a May 15 statement.

These households could only afford 37.1 percent of home listings as of March 2025, it said. For those making $75,000 per year, only 21.2 percent of homes were accessible. A household needed to make $250,000 or more annually to afford at least 80 percent of the listed homes.

“For many first-time home buyers, navigating the current housing market still feels like window shopping,” said Nadia Evangelou, NAR senior economist. “Listing prices don’t match first-time home buyers’ budgets.”

“If the promising trend of building smaller homes continues, that could be a meaningful step toward easing the housing affordability gap for more buyers.”

Based on calculations by Redfin, home buying may improve in the future as the U.S. market currently has almost 500,000 more sellers and buyers, a situation that will “likely cause home prices to fall,” the brokerage said in a May 29 statement.

This is the highest number of home sellers since March 2020. This is also the lowest number of home buyers since 2013, except for April 2020 amid the onset of the COVID-19 pandemic.

Redfin attributed the high number of sellers to factors such as economic uncertainty and homes being too expensive for people to buy.

“The balance of power in the U.S. housing market has shifted toward buyers, but a lot of sellers have yet to see or accept the writing on the wall,” said Redfin senior economist Asad Khan. “Many are still holding out hope that their home is the exception and will fetch top dollar.

“But as sellers see their homes sit longer on the market and notice fewer buyers coming through on tour, more of them will realize that the market has adjusted and reset their expectations accordingly.”