Newly built homes cost less than existing ones? It’s a historic anomaly, but nonetheless true in the Dallas-Fort Worth area. Let’s look at this unusual shift and what it means for would-be homebuyers.

Low Inventory is Driving the Trend

The historic inversion has roots in the record-low interest rates of 2020 and 2021. Many homebuyers who got in on those once-in-a-lifetime mortgage rates don’t want to give up their mortgages by making moves. And so they’re hanging on to their existing homes, leaving fewer on the market.

This drop in existing home inventory is pushing homebuyers to new homes offered by builders, who welcome them with discounts and incentives. One common incentive is a mortgage rate buydown, in which the builder pays a part of the home’s upfront cost to help lower the interest rate.

Low Construction Costs Are a Factor

According to the Dallas housing consultancy firm Residential Strategies, builders are meeting the new demand with more affordable homes on smaller lots. In 2014, 41% of the DFW area’s home construction starts were on lots under 60 feet wide. In June 2023, over 66% of new homes were built on lots of this size. Residential Strategies says builders are also reporting leveled-out construction costs and shorter build times.

And local builders have been shifting away from higher-end homes. From the second quarter of 2022 to the second quarter of 2023, construction of homes priced at $561,000 and higher has fallen 40.7% in the Dallas-Forth Worth area.

So what’s the difference in price?

Residential Strategies says that, on average, new homes are $12,000 less expensive than existing ones. From June 2022 to June 2023, the median price of a new home in the DFW area has dropped 6%, decreasing from around $423,000 to $398,000. And there’s been a 9% increase in the average cost of existing homes since the start of 2023. Those two factors combine to create an inversion that’s unprecedented in the Dallas area.

Homebuilders Are Seeing Record Sales

One year ago, newly constructed homes represented about a third of homes for sale in the Dallas-Fort Worth area. By June 2023, that number had climbed to 38%. Meanwhile, sales of existing homes are comparatively sluggish. The most recent Texas Housing Insight report from Texas A&M University found that existing homes in the DFW area sit on the market for an average of 56 days. That’s up from 29 days in January 2022.

Whether you choose new construction or an existing home, we’ve got the perfect financing. Connect with one of our loan experts online, or give us a call at (972) 591-3097.