Imagine walking into a car dealership and being told that a new car would cost you less than a used car. All else being equal, a buyer would likely wonder, “What’s the catch?”
Examining what the Mortgage Bankers Association (MBA) recently described as a “relatively large number of new homes available for sale,” a new analysis from the Urban Institute highlights how that backlog of completed unsold homes has resulted in an unusual reversal of which homes typically fly the highest price tags.
Published monthly by the policy research group’s housing finance division, Urban’s mortgage chartbook for January underscores a pricing gap that has formed between new homes and existing homes due to their different supply levels post-pandemic. Other factors also drive variations in new-home and existing-home pricing trends, such as area amenities.
Months’ supply is a commonly cited measure of how quickly the available inventory of new homes would sell at the present sales pace. Though the inventory level exceeded nine months’ supply for much of the first half of 2025, it eased to 7.9 months by the end of October — the last month for which official data is available due to last fall’s federal government shutdown.
The months’ supply of existing homes was a non-seasonally adjusted 3.3 at the end of December, down from 4.4 in October, according to U.S. Census Bureau data. After averaging between four and 5.5 months’ supply from 2019 to 2021, new homes exploded to an average of more than eight months’ supply from 2022 through 2024.
The months’ supply gap between existing homes and new homes has widened the gap between their median sales prices, as both markets struggle to find stable footing for prices post-pandemic. Home price growth softened considerably nationwide in 2025, with strength concentrated in the Midwest and Northeast regions and price softness concentrated across the Sun Belt.
Federal data collected by the Census Bureau and the Department of Housing and Urban Development shows that across homebuying channels, the median sales price for a new home sold in October was $392,300, nearly $30,000 lower than the median sales price of $421,000 for an existing home sold that month.
While slow demand from homebuyers disappointed sellers across the board last year, the impact on this price trend varies greatly if the seller is a builder. Most notably, new-home builders sitting on standing inventory have been watching the compounding expense of holding that inventory erode the potential profit from any future sale.
As a point of comparison, the pace of new-home construction in the U.S. is roughly 38% below its peak in 2006, before the 2008 financial crisis from which the speed of new-home construction has never recovered. Industry advocates attribute much of the slowdown to the delays and costs on home building of overburdensome regulations.
Urban’s analysis of the months’ supply trends, which reflects how quickly the available inventory of new homes would sell at a given sales pace, concludes that a surplus of new homes and a shortage of existing homes remains a wedge in the market.
But it used to be new homes that flashed the bright smile of premium pricing to homebuyers, and much like new cars do, new homes shed some of that brightness with the first crumb to fall beneath the baseboard heating.
In the past 30 years there have been two major run-ups in home prices, the first during the lead-up to the 2008 financial crisis and the second during and in the wake of the COVID-19 pandemic. Median new-home prices have only slipped below median existing-home prices during two periods over that span.
After fluctuating in the same median sales price range between $400,000 and $430,000 through 2023 and the early months of 2024, median new-home prices have only been higher than median existing-home prices for a single three-month window since April 2024, and have not risen above existing-home prices since March 2025.
After peaking at $460,000 in October 2022, the median sales price of a new home had slid to $392,300 by the end of October 2025, a nearly 15% decrease over three years. Meanwhile, the median existing-home sales price in October of $421,000 was only 4% off its summer and historical peak of $439,000 set in June.
Most housing forecasts are calling for price softening nationwide, with pockets of heightened gains and steeper declines in disparate regional markets as pandemic-era distortions continue to play out. Meanwhile, months’ supply trends driving the current price reversal support the continued existence of price gaps, while builders have reported pulling back on housing starts until sales conditions improve.
Restricting the supply of new homes as the backlog dwindles could firm up prices for builders this spring but would slow the pace at which the broader housing market can recover much-needed inventory.
Robert Dietz, chief economist of the National Association of Home Builders, told Scotsman Guide recently that the share of new-home cash buyers likely rose during 2025 as home builders leaned on sales incentives to sweeten the deal for buyers. Regional trends vary, with steeper discounts across the Sun Belt in somewhat oversupplied markets.
The MBA estimates that new-home sales plunged 15% from November to December, though official statistics have yet to be published, but mortgage applications for new-home purchases were up 2.5% over the year that month.
