Buying a newly built home still costs less per square foot than purchasing an existing home nationwide, as a pandemic-era construction boom and heightened inventory push builders to drop prices and offer incentives, according to a new Zillow analysis.
Zillow found that, as of July 2026, new homes sold for a national median of $205 per square foot, below the $212 median for existing homes. That marks a sharp reversal from prior years, when new construction usually commanded a premium.
From 2018 to 2024, new homes sold for more per square foot than existing homes in 77 of 84 months, with the new-construction premium peaking at an additional $25 per square foot in November 2022, Zillow said.
However, that trend reversed over the past 19 months. Since then, new homes have sold at a discount to existing homes for 17 months. The steepest discount so far came in June 2026, at $12 per square foot.
The shift is also evident in sales prices. As of August, the median new home sales price was $393,700, close to a five-year low and down from a Q4 2022 peak of $442,600. Meanwhile, according to the National Association of Realtors, the median sales price of existing homes was $429,100 in August.
Builders cut prices to move inventory
The shift reflects a growing willingness by builders, increasingly driven by necessity, to cut prices and leverage incentives to move standing speculative home inventory. Homebuilders, particularly national public operators, can offer a degree of incentives that sellers on the resale market can’t or aren’t willing to match.
Still, this trend isn’t happening uniformly across the country. New homes in the most supply-constrained markets, particularly in the Northeast and Midwest, continue to sell at a premium.
Meanwhile, markets where new homes sell at a discount to the resale market are disproportionately concentrated in high-growth Sun Belt markets with abundant new supply.
“That makes sense from a supply and demand point of view. There are just more homes available, so the market is slower for a seller, whether or not you’re a new homebuilder or an existing home seller,” Zillow Senior Economist Kara Ng told HousingWire TBD.
The U.S. Census Bureau reported 9.6 months of new-home supply in July 2026, up from 7.6 months two years earlier and well above the roughly six months seen in July 2018 and 2019. That level of supply gives buyers more leverage when purchasing new homes, especially in markets where construction surged during the pandemic.
For builders, the ability to use incentives and discounts to move inventory largely depends on their gross profit margins. Those with stronger margins have more room to offer concessions, even if doing so cuts into profitability, while builders with already strained margins have less flexibility.
For example, Green Brick Partners, which has the highest gross profit margin — 29.8% — of any homebuilder, has greater flexibility to offer margin-compressing incentives and discounts than many competitors with far more constrained profitability. On recent earnings calls, company executives indicated that they are willing to leverage these margins to strategically drive more volume in certain cases.
Meanwhile, Hovnanian Enterprises, which reported one of the lowest gross profit margins among public homebuilders at 14.6%, has less room to offer incentives without further eroding profitability. In fact, the company has actively recalibrated its product mix to raise margins.
New homes will likely continue selling at a discount to existing homes for the foreseeable future. But the duration of that trend could depend on how much longer builders can absorb the costs of steep discounting and incentives. The pace of new construction, particularly in the Sun Belt, where many builders are already scaling back production, will also matter.
Builders face competition from resales and rentals
How the resale market performs will also contribute to how long the price gap between new and existing homes persists.
Executives from Lennar and KB Home said on recent earnings calls that sellers in many markets are increasingly willing to cut asking prices or offer concessions to close deals. This phenomenon is likely, at least in part, a reaction to the steep discounting taking place in the new home sales market, in combination with the broader affordability pressures impacting buyers.
“There’s a seasonal component as well,” Ng said. “We just had a big spike in mortgage rates. Sellers know that buyers are bumping against the affordability ceiling, and then at the same time, if they want to sell their home, the window is sort of closing before you get to the holiday period.”
The rental market presents another source of competition for homebuilders. A recent Zillow analysis found that renting costs $1,066 less per month than buying. Since affordability pressures continue to sideline prospective buyers — Lennar reported that half of the prospects who toured its communities last quarter didn’t qualify for a mortgage — renting remains the more viable option for many households. Incentives and discounts can bridge the affordability gap, but often not by enough.
The steepest discounts are concentrated in the Sun Belt
The relative discount for new homes is typically largest where construction boomed during the pandemic, especially in large Sun Belt markets, according to Zillow.
Looking at July 2026 medians, some notable price-per-square-foot disparities include:
- Austin, Texas: $184 new vs. $228 existing. New homes account for 31.1% of sales, up from 28.8% in 2019.
- Raleigh, North Carolina: $188 new vs. $219 existing. New homes make up 33.6% of sales, similar to 32.8% in 2019.
- Tampa, Florida: $198 new vs. $226 existing. New homes accounted for 13.6% of sales, compared to 16.1% in 2019.
- San Antonio, Texas: $156 new vs. $164 existing. New homes are now 37.1% of sales, up from 24.2% in 2019.
- Dallas, Texas: $175 new vs. $195 existing. New homes account for 25.8% of sales, up from 18.9% in 2019.
Premiums persist where new construction lags
In contrast, where new construction is scarce and regulatory or land constraints limit building, new homes still command a sizable premium.
Zillow’s analysis highlights several metros where new construction remains significantly more expensive per square foot than existing homes. Among them are the following:
- New York City area: $727 new vs. $441 existing. 3.2% new-home share, down from 4.1% in 2019.
- Cleveland: $223 new vs. $148 existing. 2.1% new-home share, down from 7.3% in 2019.
- Milwaukee: $316 new vs. $216 existing. 4.9% new-home share, up from 2.2% in 2019.
- Detroit: $239 new vs. $165 existing. 3.5% new-home share, down from 4.4% in 2019
- San Jose: $948 new vs. $889 existing. 5.9% new-home share, down from 9.6% in 2019.
In these markets, limited new-home supply, higher land and construction costs and a disproportionate focus on higher-end homes work together to keep new builds positioned as a premium segment. Despite constrained inventory, existing homes remain the more affordable option for most buyers in those markets.
New construction’s role in the sales mix
Nationally, newly built homes made up 12.6% of all home sales in the 12 months ending July 2026, matching their share in 2019 and signaling a return to pre-pandemic norms after new construction peaked at 16.7% of sales in 2023, Zillow’s analysis shows.
The share of new-home sales varies widely across the country:
- Highest new-home share: San Antonio (37.1%), Austin (31.1%), Houston (30.7%), Nashville (26.3%), Dallas (25.8%), Jacksonville (22.6%) and Charlotte (21.9%).
- Lowest new-home share: Hartford (2%), Cleveland (2.1%), New York (3.2%), Pittsburgh (3.4%) and Detroit (3.5%).
Since 2019, the biggest gains in new-construction share are in Texas markets. San Antonio’s new-home share is up 12.9 percentage points, Dallas is up 7 points and Houston is up 6.8 points. On the other side, New Orleans has seen the steepest drop, with new homes’ share of sales down 17.7 percentage points since 2019. Baltimore is down 5.8 points and Atlanta is down 5.7 points.
