BLOGBlog posted On July 10, 2025
Buying old versus new, especially if you’re a first-time buyer, seems to have an automatic choice: older homes are likelier to be more affordable than brand new properties with fancy appliances. Does that long-held belief still hold true though? Due to recent trends, the pricing gap between existing homes and new construction has narrowed considerably. Let’s dive into this new build boom and the rising popularity of new construction, tackling how home buyers can benefit from these trends.
What Caused the Boom?
During the pandemic, mortgage rates were historically low, causing a massive spike in home buying and refinancing. On the flipside, there was an inventory shortage, creating this bottleneck of buyers anxious to take advantage of lower rates, fighting to grab what limited housing was on the market. Builders rushed to buy up land and construct new communities in 2020 and 2021 to meet the demand of these bidding wars. According to Yahoo! Finance, the S&P Homebuilders Select Industry Index surged “134% between October 2020 and October 2024, its peak.”
Rates Climbed, Demand Dipped
Like a pendulum, rates swung back up in 2022 and housing demand dropped. In the meantime, all of these new construction homes had been rapidly built, causing a surplus in the market. Since its late 2024 peak, the S&P Homebuilders Index has slumped due to the now excessive inventory. So, how can buyers in 2025 take advantage of this surplus and work with builders to boost affordability?
How Can Buyers Benefit?
Historically, newly constructed homes have carried a premium price, considering they have modern finishes, updated layouts, and newer materials. However, because of the current economy, builders are now more than ever looking to boost affordability for their potential buyers by providing buydowns and upgrade packages. The National Association of Home Builders reported that more than 60% of builders used sales incentives in September of 2024 to cut the average home price by 5%. This brought back many buyers into the market who otherwise would not have been able to afford a new home.
By offering incentives like rate buydowns, flex cash, free appliances, and paid closing costs, builders are working harder than ever to sweeten the deal for buyers. For instance, we offer our own program called Build & Lock™, which allows builders to advertise a discounted rate on a property.
Builders are also diving more into “quick move-in” spec homes, which are homes that can be moved into within 90 days, avoiding the six-to-nine-month waiting period for traditional builds. These homes tend to be more affordable too.
How Do Rate Buydowns Work?
A buydown involves buying mortgage points that lower your rate by a certain percentage either temporarily or for the entirety of the loan’s life. Temporary buydowns are what builders have been utilizing lately, a popular option to entice buyers to their new builds and help mitigate the buying slump with discounted monthly payments.
The monthly payment will be discounted for the first year of your loan and then will revert back to the note rate in the second year
The monthly payment will be discounted for the first two years of your loan and then will revert back to the note rate in the third year
Following the same pattern, the monthly payment will be discounted for the first three years of your loan and then will revert back to the note rate in the fourth year. This buydown option offers the most significant reduction
So, instead of looking at old homes, why not give new homes a chance? With the new construction market looking more inviting than the existing homes market, it’s time to leap off the sidelines and take advantage of these buyer incentives while they last. In this high-rate economy, you can discover surprising perks, like affording a brand new kitchen with sparklingly new appliances, glittering bathrooms, and rooftop access. Depending on your location, we can help you hunt for the best builder offerings in your area. Reach out and we can get you started on a potential path to a brand new, affordable home!
Source: National Association of REALTORS, Investopedia, Yahoo! Finance, CNBC
