Preference for New Homes Keeps Rising
Faced with the alternative of choosing between an existing home and a newly built home, the desirability for new homes continues to rise with 61% of home buyers in a recent NAHB study* indicating that a new home is their first preference. That marks the highest share of buyers leaning toward a new home since 2007, when 63% of buyers preferred new construction.
According to Eye On Housing, To compare, in 2018, 54% of buyers preferred a new home. The share jumped to 60% in 2020, as the COVID-19 pandemic reduced existing inventory and made many buyers afraid of touring occupied homes. By 2023, high mortgage rates had ‘locked-in’ millions of existing homeowners in their homes, and that supply vacuum left new homes as the only available option for many buyers.
An important fact to highlight is that in 2023, the price of a typical new home was only 9% higher than the price of a typical existing home ($428,200 vs. $394,100). In sharp contrast, that gap was four times larger in 2013, when new homes cost 36% more than existing homes ($268,900 vs. $197,400).
New homes can be custom-built on the buyer’s lot, or they can be built-for-sale (including the land). Over the last two decades, the NAHB study* shows a rising trend in the share of buyers who would prefer a new home built-for-sale, from 22% in 2003 to 40% in 2023. In contrast, the share who would prefer a custom-built home declined from 49% to 21% during this period.