U.S. New Homes Undercut Existing Stock in a Third of Markets Amid Rising Inventory

The price per square foot for newly built homes has taken a dramatic turn in many parts of the country, frequently crossing below that of existing homes for the first time in U.S. history. According to Zillow, newly built homes are now currently selling at a median price per square foot of $205 nationwide as of July 2026, a figure significantly below that of existing homes at $212/sqft. Perhaps most notable, however, is that in many of the Sun Belt cities listed above, newly built homes are currently selling for 12-19% less per square foot than existing homes in the same city.

In contrast to that historical premium, many newly built single-family homes today are coming to market at prices that are less than comparable existing homes. A number of factors are driving this new dynamic, including a large supply of finished homes that builders are struggling to sell. Inventory of new homes for sale has reached 9.6 months’ supply as of July, up from 6 months’ supply in 2018-2019, for example. As a result, many builders are lowering prices and offering incentives to try to get buyers to come take a look.

Existing inventory for sale continues to trail pre-pandemic levels—currently down some 17%—as many homeowners reap significant equity and continue to write large checks to service low-rate mortgages. In the absence of significant supply, pricing between new and existing homes is becoming increasingly divergent.

New home inventory in highly developing markets such as San Antonio and Raleigh are seeing higher percentages of new home sales compared to other markets (33-37%). Conversely, highly constrained markets such as New York and Detroit are seeing new home premiums. However, a recent decline in new home permits brings into question the sustainability of current home price affordability.

However, the new-home market also looks tired. August new-home sales jumped 6.4% from July to a 684,000 annualized rate. But that’s still 2% below last year’s level, and not strong enough to counteract the effects of a 7% mortgage rate. Most builders have 483,000 unsold new homes on their hands, and an 8.5-month supply, so they are walking a tightrope between setting prices to get buyers to come in off the sidewalk, and trying to protect their thin margins in a tough market.

Practical Takeaways for Buyers & Investors:

1. In fast-building Sun Belt markets, new homes can offer better price per square foot and negotiation leverage versus existing properties; scope out communities with heavy development for deals.
2. Pay close attention to builder incentives in markets where the inventory of new homes is high, as these can significantly improve the terms of purchase for a new home.
3. Be aware that even a slight decrease in mortgage rates below 7% could boost demand, so it is smart to keep your financing options open.
4. The flow of new permits may impact the pace of construction and affect the current pricing advantages of new homes.

The Final Takeaway:

Of course, the new-home pricing inversion challenges a key assumption of the past and, going forward, poses a host of new questions. Will new-home construction slow due to various permitting delays and then will affordability for housing increase or decrease? We believe tracking supply policies and builder inventories will become as relevant as following mortgage rates for those interested in investing in housing.