Urban New Construction Is Scarce, Expensive, and in High Demand
Urban new builds account for just 11% of listings but carry a 78% price premium
Urban new builds are rare. Nationally, just 10.9% of new construction listings are in urban zip codes, compared to nearly 30% of existing homes. When they do appear, buyers pay a significant premium: urban new construction carries a 78.4% price premium over urban existing homes, with a median listing price of
"New construction is overwhelmingly a suburban story in
Where New Homes Are Built Determines How Much They Cost
New construction homes for sale are overwhelmingly located in suburban areas and that impacts their price. Nearly 80% of new homes for sale are suburban, compared to just over 55% of existing homes. Suburban new builds carry just a 7.0% premium over suburban existing homes. Suburban new construction is plentiful, competitive, and concentrated in the South, where listing prices tend to be lower.
Urban new construction is a different market entirely. New construction is underrepresented in urban areas. Nearly 30% of existing homes for sale are in urban zip codes, but just over 10% of new construction homes are.
Seven metros have a majority of their new construction listings in urban zip codes:
|
Metro Area |
Urban Share |
New |
Urban Share of |
|
|
69.6 % |
106.8 % |
71.3 % |
|
|
69.5 % |
305.2 % |
79.6 % |
|
|
68.9 % |
30.1 % |
67.0 % |
|
|
68.8 % |
42.4 % |
77.5 % |
|
|
62.4 % |
24.9 % |
73.1 % |
|
Urban |
53.8 % |
29.2 % |
66.4 % |
|
|
53.4 % |
23.5 % |
61.2 % |
At the other end of the spectrum, nine of the ten metros with the lowest new construction premiums have urban shares of new construction listings below 10%. In
|
Metro Area |
Urban Share of New |
New |
Urban Share of Resale |
|
|
2.9 % |
-13.5 % |
17.0 % |
|
|
12.2 % |
-7.7 % |
26.2 % |
|
|
8.6 % |
-6.0 % |
29.6 % |
|
Pensacola- |
7.0 % |
-5.7 % |
13.9 % |
|
Boise City, ID |
3.0 % |
-4.8 % |
15.1 % |
|
|
9.2 % |
-0.5 % |
10.6 % |
|
|
4.8 % |
2.6 % |
23.2 % |
|
|
7.6 % |
2.9 % |
21.9 % |
|
|
9.5 % |
4.0 % |
42.5 % |
|
|
7.7 % |
4.1 % |
22.4 % |
The metros with the steepest urban new construction premiums include
|
Metro Area |
|
Urban Existing |
|
|
|
|
|
461.8 % |
|
|
|
|
302.0 % |
|
|
|
|
203.2 % |
|
|
|
|
202.7 % |
|
|
|
|
176.3 % |
|
|
|
|
169.5 % |
|
|
|
|
169.2 % |
|
|
|
|
116.0 % |
|
|
|
|
115.4 % |
|
|
|
|
113.8 % |
"The price signals for urban building are clear," said Berner. "As more jurisdictions streamline permitting and adopt more permissive zoning, builders will follow the opportunity. The demand is there — the question is whether the policy environment will allow supply to catch up."
New Construction Holds Steady While Existing Home Prices Fall
Nationally, the median listing price for new construction came in at
Inventory trends are also shifting. New construction inventory growth has held steady in the 5% to 9% range year over year, while growth in existing home inventory is slowing to match it. New construction's share of total listings on the market held nearly flat at 19.3%, compared to 19.4% last year.
For the second consecutive quarter, new homes have seen price reductions at a higher rate than existing homes — even as overall new construction prices have remained stable. That combination points to active price management by builders, who are listing homes higher and adjusting down to meet buyers.
"Builders are navigating a difficult environment," said Berner. "They are facing rising costs for labor and materials while competing for buyers who are already stretched by high mortgage rates and economic uncertainty. The fact that prices have held steady is a testament to how carefully builders are managing their inventory — but the uptick in price reductions tells you the pressure is real."
Time on market for new construction has remained constant, even as the existing home market continues to slow. Price per square foot has also returned to its expected relationship, with new homes now commanding
Methodology
Realtor.com
® housing data as of
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