In a rare shift for the U.S. housing market, new homes are now selling for less than existing ones, and by the widest margin ever recorded. Post-pandemic trends have tilted the market in favor of homeowners with low-rate mortgages, leaving first-time buyers struggling to break in.
In June, it was $33,500 cheaper to buy a new home than an existing one, according to Reventure data cited by The Kobeissi Letter, a market commentary by Adam Kobeissi. Not even in the run-up to the 2008 financial crisis did the gap reach this level.
Something is seriously wrong here:
undefined The Kobeissi Letter (@KobeissiLetter) August 19, 2025
For the first time in history, a NEW home in the US costs $33,500 LESS than an EXISTING home, per Reventure.
Not even June 2005 saw such a large gap, right before the 2008 Financial Crisis.
What is happening? Let us explain.
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Typically, new homes cost more than existing inventory because they’re brand new, larger, and outfitted with modern features. While there have been brief periods when new builds dipped below existing prices, the current discount is unprecedented.
Kobeissi attributes the reversal to the “golden handcuffs” effect: homeowners are reluctant to sell because they’d lose the ultra-low mortgage rates they locked in during the pandemic. Many of those rates were around 3%, while today’s 30-year mortgages are more than double that.
With so few existing homes for sale, new construction now accounts for a record one in three listings. For comparison, after the 2008 crash, only about 5% of homes on the market were new builds.
Builders are responding by cutting costs and shrinking floor plans, while also offering aggressive financing incentives. Taylor Morrison (TMHC), for example, is buying down mortgage rates by more than 100 basis points to move inventory.
Taylor Morrison reported second-quarter earnings on July 23, posting net income of $194 million. Net sales orders, however, fell 12%, and cancellations rose to 14.6% of gross orders, up from 9.4% a year earlier. The company attributed the uptick in cancellations to a decline in consumer confidence.
Despite headwinds in the mortgage market, Taylor Morrison shares are up about 9% this year, mirroring gains in the S&P Homebuilders Select Industry Index.
Mortgage rates remain stubbornly high
The unusual dynamics in the U.S. housing market are unlikely to ease soon, with 30-year mortgage rates averaging 6.58% last week, according to Freddie Mac - almost unchanged from the 52-week average of 6.68%.
Stubborn inflation, including the largest monthly jump in producer prices in three years, has led Wall Street to scale back expectations for Federal Reserve rate cuts.
While the Fed doesn’t set mortgage rates directly, its monetary policy outlook strongly shapes them.
“The Federal Reserve’s policy stance plays a key role, but it’s more about what the Fed’s decisions signal than it is about any single change in the federal funds rate,” Darren Tooley of Union Home Mortgage told CBS News.
CME Group data shows that traders now see an 82% chance of a September rate cut, down from nearly 100% earlier, and expectations for multiple cuts have also decreased.
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