Builder incentives and smaller homes are bringing new-home prices closer to resales, creating a rare buying window in some markets.
WASHINGTON – For the first time in years, the price gap between newly built homes and existing homes is narrower than ever — and in some markets, the typical resale home is actually more expensive than a new build. A mix of builder price cuts, widespread incentives and smaller home sizes has brought new-home pricing more in line with resale values, creating a potentially unusual buying window for prospective home buyers.
But challenges persist in the new-home market. Overall, “2025 was a disappointing year for newly built single-family homes,” acknowledges Robert Dietz, the chief economist at the National Association of Home Builders. “We entered the year expecting relatively flat conditions, but with a mix of policy headwinds and economic opportunities, single-family home construction fell by about 7%. Builders consistently pointed to ongoing housing affordability challenges, along with supply side issues like a persistent skilled labor shortage.”
So, what lies ahead for the new-home market and for home buyers? Dietz shares his insights.
What’s your outlook for the new home market for 2026?
We are starting to see some modest improvements. One of the biggest tailwinds is the Federal Reserve’s easing [of its short-term interest rates] late in 2025. While the Fed doesn’t directly control mortgage rates, its actions matter a lot on the supply side—particularly for builders’ financing costs. About two-thirds of home construction is done by smaller, private builders who rely on bank loans to purchase land, materials and pay workers. When the Fed lowers the federal funds rate, it directly reduces the interest rates on construction and development loans. That’s good news for builders, inventory and ultimately for home buyers and renters.
For 2026, we’re forecasting about a 1% increase in single-family home building and a similar 1% gain in new home sales. Existing home sales should rise more sharply as inventory improves, but many of the same challenges—policy uncertainty, lingering tariff effects and the broader housing deficit—will remain.
Builder incentives have been making headlines and are helping to lower the costs for home buyers. Tell us more about what type of incentives builders are offering.
Incentives are very elevated right now, and that’s good news for buyers. About 40% of builders cut prices in December, with average reductions around 5%. Nearly two-thirds are also offering other incentives.
One of the most common tools — especially among larger builders — is mortgage rate buydowns. Builders are using their financial resources to lower buyers’ mortgage rates for the first two or three years, helping to ease monthly payment pressures. Other incentives include amenity upgrades and closing cost assistance, though there are limits to how much builders can offer. Still, it’s one of the industry’s main ways of responding to ongoing affordability challenges.
Historically, new homes have been more expensive than existing homes. But is that changing?
This is one of the real oddities in today’s data. Right now, the median resale home is actually more expensive than the median newly built home. That’s only happened a handful of times over the past few decades.
Typically, new homes carry a 10% to 15% price premium because they offer more amenities, lower maintenance costs and newer systems. But today’s builder incentives—combined with more construction happening in lower-cost areas—have flipped that dynamic.
It’s also a sign of the larger structural housing deficit. Even with inventory increasing in many markets, the housing stock simply hasn’t kept pace with population growth. That imbalance continues to show up in prices.