Only 10.9% of new housing construction listings were in urban ZIP Codes during the first quarter of this year, according to new data from Realtor.com. However, urban new construction carries a 78.4% price premium over urban existing homes, with a median listing price of $738,662 versus $414,000 for existing urban homes.
Realtor.com determined that new construction homes for sale are overwhelmingly located in suburban areas – nearly 80% of new homes for sale are suburban, but these properties carry just a 7.0% premium over suburban existing homes.
Realtor.com also observed that nearly 30% of existing homes for sale were in urban areas, compared to just over 55% in suburban markets.
“New construction is overwhelmingly a suburban story in the United States, and that has real consequences for buyers who want to live in cities,” said Joel Berner, senior economist at Realtor.com. “Urban new builds are difficult to deliver, and that difficulty is priced in. When a new home does come to market in an urban zip code, it commands a price that reflects just how hard it was to build there.”
Seven metros had a majority of their new construction listings in urban ZIP Codes in the first quarter: New York City (69.6%), Miami (69.5%), San Francisco (68.9%), Los Angeles (68.8%), New Orleans (62.4%), Urban Honolulu (53.8%), and San Diego (53.4%). These metros carry a new construction premium above the national average – most notably. Miami’s new construction premium of 305.2%.
“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.”
Furthermore, Realtor.com pointed out that new homes have seen price reductions at a higher rate than existing homes for the second consecutive quarter, even as overall new construction prices have remained stable.
“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.”
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