Why Homebuyers Face a Split Path in a Stalled Housing Market
No matter how you slice the numbers, the housing market is in a tight spot. Home prices keep climbing, home sales keep falling, and the dream of owning a home is becoming harder to reach for millions of Americans. But tucked beneath these bleak headlines is a surprising twist—homebuyers today are really shopping in two very different markets: new construction and existing homes.
For those looking to buy, the first major decision may not be about location or number of bedrooms, but about whether to pursue a newly built home or an existing one. And while both options come with trade-offs, a growing divergence between these two segments is shaping how and where homes are being bought and sold.
According to Lawrence Yun, chief economist at the National Association of Realtors, this divide is unusual. “Usually, new home sales and existing home sales move together,” he said. But that’s not what is happening today.
Existing home sales have slumped for three consecutive months, dipping another 0.5% in April. Compared to last year, sales are down 2%, reaching a seasonally adjusted annual rate of just 4 million—the lowest since September. Inventory remains tight, with only about 4.4 months of supply available. Homeowners with low mortgage rates are reluctant to sell, choking off fresh listings and creating fierce competition for what little is out there.
In contrast, the new construction market is gathering momentum. Sales of new homes jumped more than 10% in April, climbing to an annualized pace of 743,000. The reason? Builders have what many agents don’t: inventory.
With fewer resale homes hitting the market, buyers are looking to new builds as their best or only option. “We don’t have so much inventory of existing homes. For new homes, builders can simply build more,” Yun explained. As a result, newly built homes now make up a growing share of all home purchases—and their prices are becoming more competitive.
Historically, new homes have carried a hefty premium over existing ones—often 10 to 20 percent more. But that premium has shrunk dramatically. In April, the median price for a new home was $407,200, nearly $7,000 less than the price of a typical existing home. Builders have started responding to the affordability crisis by constructing smaller homes, aiming to appeal to more moderate-income buyers and even FHA borrowers. According to the U.S. Census Bureau, the median size of a new home is now down 12% from its peak in 2015.
This shift in pricing strategy may explain why new homes are suddenly so appealing. Builders are no longer focused solely on luxury properties—they’re adjusting to market realities, including interest rates, budget-conscious buyers, and stricter lending environments.
Still, buying new isn’t for everyone. New homes tend to be smaller and farther from city centers, and for growing families, that trade-off may not be worth it. As economist Robert Frick of Navy Federal Credit Union noted, “It’s really a question of family needs. I can see young families not wanting to buy a small new home because it just doesn’t fit their needs.”
Even with prices becoming more level, the decision between buying new or existing is still complex. Existing homes often offer more space, mature neighborhoods, and desirable locations. New homes, on the other hand, can offer modern amenities, builder warranties, and the benefit of skipping bidding wars.
For now, the split in the housing market appears likely to continue. Buyers are still facing high prices and limited choices, but those willing to consider new construction may find unexpected value—and fewer obstacles—waiting for them on the outskirts of town.