- Fixer-uppers aren't the bargain they once were.
- Older homes are now nearly as expensive as new builds.
- The housing shortage and high mortgage rates have reduced existing home inventory.
If you're looking for a deal in the homebuying market, you might want to ditch the fixer-upper and spring for a brand-new home.
For the last half-century, newly-built homes in the US have sold for much more, on average, than older homes. But these days, new homes for sale are less expensive per square foot than existing homes. Overall, newly constructed homes are selling for just 3% more than older homes, down from an average of 16% more since 1968, The Wall Street Journal reported.
Prices for existing homes have risen as fewer of them are on the market. The inventory of existing homes being resold has fallen significantly in recent years. As of March 2024, the number of existing homes for sale had fallen to 1.1 million from 1.7 million in 2019, and sales of existing homes hit a near 30-year low last year, a Harvard report found earlier this year.
High mortgage rates could be exacerbating that shortage of existing homes, as many homeowners are putting off a move and waiting for the cost of a home loan and home prices to come down.
But this trend might be turning around. Sales of existing homes are on the rise in the Midwest, South, and West, the National Association of Realtors recently reported. "The worst of the downturn in home sales could be over, with increasing inventory leading to more transactions," NAR chief economist Lawrence Yun said in a statement.
As rates fell slightly this year, more homeowners put their homes up for sale and new home construction rose. The US is on track to build a record number of new multifamily units this year — about 500,000 Still, there's a long way to go to make up for the overall shortage in housing, which Freddie Mac recently reported was 3.7 million homes.
There are a slew of other factors at play, as well. The costs of building materials and construction labor are elevated, which makes repairing or renovating older homes much more expensive. And it doesn't help that US homes are older than ever. The median age of owner-occupied homes in the US has risen to 40 from 32 when the housing market collapsed in 2008.
New homes are getting smaller, too. The typical new build for sale in the first quarter of 2024 was 2,140 square feet, down from 2,256 square feet a year prior, according to Census data. Newly built homes peaked in size in 2015 at 2,689 and have been shrinking quite steadily since then. The share of newly constructed single-family homes with four bedrooms fell to 33% last year, the lowest level since 2012, the National Association of Homebuilders found. Meanwhile, the share of new single-family homes with two bedrooms or fewer grew to its highest level in that same period.
Did you choose between a new and an older home when purchasing? Share your story with this reporter at [email protected].