Existing homes are being outsold by new homes. Reasons explained below.
In the U.S. housing market, two distinct segments are emerging: new and existing home sales. While existing home sales continue to deteriorate, new home sales are gaining momentum, creating a stark contrast between the two sectors.
The dynamic supply and demand conditions shape each market differently. Existing home sales face a historically low inventory, triggering competition and escalating prices. Conversely, new home sales have proven advantageous for builders, who can tool up to meet rising demand due to their inventory control.
New home prices have shown encouraging signs, inching closer to existing home prices, according to the National Association of Realtors' (NAR) chief economist, Lawrence Yun. This change in trend breaks the historical pattern of new homes carrying a premium above existing homes. The shift in builder strategies has addressed the needs of moderate-income buyers, increasing the affordability of new homes.
Yun noted that while new home prices are aligning with existing home prices, the smaller sizes of new homes remain a concern for some buyers. These seek larger existing properties to address family needs, often leading to bidding wars and high prices in the existing home market.
In April 2025, existing home sales witnessed a 0.5% drop compared to the previous month and a 2% decline compared to the same period the previous year, resulting in a volume of 4.0 million at a seasonally adjusted rate—the lowest since September. New home sales, however, gained ground, reaching a seasonally adjusted annual rate of 743,000 in April, marking an over 10% increase from the prior month.
The housing inventory, measured as the months required to sell all the homes currently on the market, indicates a healthier new home market. As of April 2025, over eight months of newly constructed homes were available, while the existing home market represented merely 4.4 months of supply.
The divergence in the two housing markets, as observed by Yun, is unusual in the current cycle. Typically, new home sales and existing home sales move in tandem. However, the recent market conditions have carved out separate paths for each sector, as builders respond to the evolving preferences and economic conditions of potential buyers.
- Builders may consider issuing a token for investment to fund the construction of larger new homes, potentially appealing to buyers seeking more space.
- In the realm of finance, investors might find the current surge in new home sales an interesting opportunity for ico (initial coin offering), as the housing market shows signs of recovery.
- The divergence in housing-market trends could impact the real-estate sector. While the existing home market may continue to be a challenging landscape for moderate-income buyers due to high prices, greater affordability in new home sales could stimulate the growth of real-estate businesses catering to these properties.
