The average price of a new construction home was $378,850 in April. That’s roughly $87,000 more than the average price of an existing home (which was $291,900).
There are five reasons why new homes are more expensive than existing homes, and why prices are rising by tens of thousands every single month.
Low Supply & High Demand
Since the Great Recession of 2008 developers built fewer homes as you can see in the chart below.
The lack of new construction over the past 10 years is a major reason for historically low inventories we experience today. At the same time buyer demand is sky-high.
High demand combined with limited supply fuels higher prices.
The pandemic uncovered supply chain interruptions in many sectors of the economy. Material costs have spiked due to supply shortages.
Below you can see how lumber is now 3 times more expensive than before the pandemic.
Home builders have a hard time finding workers. It’s partially due to new construction projects starting up at the same time after stay-at-home orders were lifted.
However, the construction industry experienced a shortage of qualified workers even before the pandemic, as fewer young people decide to learn trades and go to college instead.
Size of New Homes
New homes are typically larger than existing homes. Builders have been focusing on high end suburbs where homes start at $400,000 and up.
These homes are usually over 2,500 sqft, much larger than the average size of an existing home.
A recent study by the National Association of Home Builders found that regulations imposed by government account for 23.8 percent of the sales price of a new home. In Columbus this amounts to $90,000.
Why You Should Build
New construction is a great alternative to avoid bidding wars in today’s hot sellers’ market.
When you build new you can design the house of your dreams, select the location, and don’t have to worry about deferred maintenance.
With home values rapidly rising you can lock in your price now and move into your new home in 10 months with a good equity cushion.
I’d love to help you with your new construction home. I personally know many builders and where the best lots and inventory homes are still available.
Call or Text me FIRST at (614) 975-9650 before you visit a model home!