Affordable new-construction housing trends dominate southern U.S. markets

Buying a home involves many choices, including the decision between new and existing homes. Traditionally, new construction has been more costly than existing homes. However, builders have adapted to market changes by creating smaller, more affordable homes. This has narrowed the price gap between new builds and existing homes. According to the National Association of Realtors®, in August, the median sales price for a new home in the U.S. was $420,600 compared to $416,700 for existing homes.

Robert Washington, founder of Savvy Buyers Realty in St. Petersburg, FL, notes that "most of the new construction taking place is in areas that are more suburban or rural." He adds that "since the land being purchased by developers and builders is relatively cheap, new build prices can actually be pretty competitively priced when compared to similar existing homes closer to city centers."

The South currently leads in new-construction markets with cities across North and South Carolina, Texas, Tennessee, and Georgia seeing significant growth. The Sun Belt states experienced a 10% population increase during the COVID-19 pandemic and experts predict an additional 19 million residents will move there over the next decade.

Realtor.com® economist Joel Berner explains that "there is a clear and present need for newly built homes to meet the demand for housing," highlighting its importance as an economic contributor.

Buyers who previously avoided the competitive housing market may now find opportunities with lower mortgage interest rates. Berner points out that "general market hotness has limited the number of existing homes for sale," but in places like Spartanburg and Sanford in North Carolina, there are more new-construction homes available than existing ones.

Berner mentions that "the Carolinas are well-represented ... in our ranking of the most buyer-friendly states for new construction," suggesting buyers may face challenges finding existing homes due to limited inventory but could find better options with newly built properties.

In several markets such as Sanford and Raleigh in North Carolina as well as Boise in Idaho, new-construction home prices are lower than those of existing homes due to increased listings leading to downward pressure on prices.

New construction offers various advantages including builder incentives like assistance with closing costs or material upgrades. Buyers might also benefit from reduced interest rates through mortgage rate buy-downs. Additionally, these properties often require fewer repairs and renovations while being more energy-efficient.