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It feels a little absurd to say newly built homes are cheaper than existing homes, which have been lived in for years, but it\u2019s true. Per square foot, new homes sold for $3.50 less than existing homes in May. It might not sound like much to you, but it is the largest discount in at least six years, according to<\/a> Zillow<\/a>.<\/p>\n If you\u2019re looking at two homes that are 2,000 square feet, the difference between the two would be $7,000. You\u2019d be paying more for an older home that\u2019s been lived in and might even need remodeling. Before the pandemic, newly constructed homes \u201ccommanded a serious premium,\u201d according to Zillow, between $15 and $22 more per square foot than existing homes. So for two homes that are 2,000 square feet, the difference was at least $30,000\u2014the premium for a completely new home, unused and likely modern.<\/p>\n \u201cNew builds have only been less expensive per square foot than existing homes in five other months since the start of 2018, and this is the biggest savings seen yet,\u201d Zillow said, adding that March was the last time new construction was more expensive per square foot.\u00a0<\/p>\n There are metropolitan areas where the difference between the two is even more substantial. In San Diego, the per-square-foot discount for new homes is $57.10, per Zillow; in Salt Lake City, it\u2019s $53.60; and in Los Angeles, it\u2019s $52.40. It\u2019s a more than $40 difference in Austin, Washington DC, and Tampa, too. <\/p>\n On the other hand, there are places where the price per square foot is much more expensive for new homes. In San Jose, it\u2019s a $216.60 premium; in San Francisco, it\u2019s $137.10; and in Milwaukee, it\u2019s $87.60. Zillow didn\u2019t explain why there are such considerable differences, but it is interesting to see some of California\u2019s most costly cities on two separate sides of the new home versus existing home equation.\u00a0\u00a0<\/p>\n This isn\u2019t to say the total sales price of new homes is cheaper than existing homes. In fact, new-build properties are about $54,000 more than existing homes, according to Zillow. But the math for comparing prices is changing as lot sizes for new homes and the share that are detached or are condos has evolved over recent years.\u00a0<\/p>\n \u201cToday\u2019s new construction buyers are getting significantly smaller lots than those in prior years, and the lot-size advantage of buying existing homes is growing,\u201d Zillow said.<\/p>\n Existing home prices are 52% higher than they were before the pandemic, while new home prices are only 26% higher. We all know home prices skyrocketed during the pandemic-fueled housing boom. But when the Federal Reserve raised interest rates to combat scorching hot inflation, mortgage rates<\/a> rose considerably from their historic lows. Would-be sellers held onto their homes, and now there\u2019s 33% fewer existing homes for sale than the pre-pandemic norm, according to Zillow, which noted the deficit is far greater in many markets.<\/p>\n While prices for existing homes soared, homebuilders offered incentives<\/a> to bring back demand, whether it be via mortgage rate buydowns<\/a> or simply building smaller homes<\/a>. And in May, the median sales price of new houses<\/a> sold was $417,400, below the median existing-home sales price<\/a> of $419,300.<\/p>\n For a time, the new home market surpassed the existing home market in terms of sales (particularly as existing home sales fell to an almost three-decade low last year). But the most recent new home sales reading showed they dropped to a six-month low in May, kind of unexpectedly. Both existing home sales and new home sales for June are slated to be released this week, so we\u2019ll see if there\u2019s any shift in either pace. <\/p>\n<\/div>\n\nRecommended Newsletter: <\/strong>CEO Daily provides key context for the news leaders need to know from across the world of business. Every weekday morning, more than 125,000 readers trust CEO Daily for insights about\u2013and from inside\u2013the C-suite. Subscribe Now<\/a>.<\/div>\n