10/01/2026
Zillow reports surprising housing market shift
By Laura Grace Tarpley
Sep 30, 2026
Growing up, it was exciting when the kid with a "new house" hosted slumber parties. These newly built homes were undoubtedly nicer than ours, with modern kitchen designs and no rooms with mysterious smells. Even as a kid, I was aware that these new houses were nicer and, as a result, more expensive. For a long time, that was mostly true.
From 2018 to 2024, newly built homes cost more per square foot than existing homes in 77 out of 84 months, according to Zillow research.
That's why the latest Zillow analysis so surprising: Newly built homes cost less per square foot than existing homes in one third of major U.S. housing markets in July.
The median cost of a new home was $205 per square foot, while the median cost of an existing one was $212 per square foot. For homebuyers, this could mean the best of both worlds: a brand-new home at a lower price per square foot.
"New homes are the overlooked opportunity more buyers should be thinking about," said Zillow senior economist Kara Ng. "Buyers who assume new homes are out of their price range may be surprised at what they find."
Why new homes are cheaper per square foot:
At first glance, it may seem confusing why new homes are becoming more affordable by square foot than existing homes.
"New homes being built today are typically smaller homes on smaller lots, but that does not explain why these homes cost less per square foot," wrote Ng. "If anything, this pivot toward more affordable, denser homes should raise the price per square foot since smaller homes spread fixed costs like kitchens and baths over fewer feet." This helped Zillow analysts narrow the reason to supply - both for existing and new homes. Housing market prices rely on supply and demand. Scarcity from lower inventory drives up competition and, therefore, prices.
Existing-home inventory is still 17.1% lower than before the Covid pandemic. People who bought homes in the early 2020s locked in mortgage rates around 3%, and many have built serious equity in their homes over several years.
For many homeowners, moving would require strong motivation. Sure, they could sell their houses for significantly more than they originally paid. But if they want to buy another home, they would have to face the darker side of higher home prices and take on a much higher mortgage rate.
Newly built homes are a different story. While existing home inventory is still lagging behind pre-pandemic norms, new home inventory has returned to roughly its pre-pandemic share of the market. In July 2026, new homes made up 12.6% of all home sales over the last 12 months - the same percentage as in 2019.
U.S. Census Bureau data showed 9.6 months' supply of newly built homes in July 2026. This is up from 7.6 months in July 2024 and only six months in July 2018 and 2019. We will see how that supply holds up over the next couple of years, though.
Zillow warns new home supply may not stay high for long. The new homes sitting on the market now are products of previous home construction completions, especially in 2024. “Attached completions jumped 22.6% in 2024, so even after a 1.8% decline in 2025 completions stand well above where they have been in recent years," Ng wrote for a Zillow home-building analysis.
However, Zillow data shows that building permit approvals have been decreasing. As of May 2026, permitting had dropped for 42 straight months.
Current new home production signals how much inventory there will be in the next year or two. Slower permit approvals are "pointing to a thinner pipeline ahead," according to Zillow.
If new home inventory is lagging in 2027 or 2028, costs will likely rise. So, while new homes are a better deal than existing homes now (at least on a per-square-foot basis), that perk might not last long.
If you want a newly built house and can comfortably afford one in today's market, you may want to consider buying sooner rather than later. However, your decision will heavily depend on where you live.
Housing markets where new construction is booming:
Zillow noted that new construction costs less per square foot in one third of major U.S. markets. New home pricing is lowest in areas that have seen surges in construction over the last couple of years. This has occurred in the Sun Belt more than in any other area.
Here are the metro areas where newly built homes made up the highest share of home sales between August 2025 and July 2026:
• San Antonio: 31.7%. The median price per square foot was $156 for new construction and $164 for existing homes.
• Austin: 31.1%. New-construction prices were $184 per square foot, and existing homes were $228.
• Houston: 30.7%. New homes were actually a little bit more expensive per square foot at $164 versus $161 for existing homes.
• Nashville: 26.3%. The median cost per square foot was $225 for new construction and $247 for existing homes.
• Dallas: 25.8%. The median cost was $175 per square foot for newly built homes and $195 for existing homes.
• Jacksonville, Fla.: 22.6%. New-construction homes cost $198 per square foot, and existing homes cost $204.
Source: Zillow
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