The Difference Between New Home Prices And Existing Home Prices Is Getting Wider

The gap between the prices of new and existing homes is widening.

New homes are historically more expensive, and the gap had been between 15% and 20%. But in the last few years, it has widened to between 30% and 40%.

“Indeed, too few new homes are being constructed,” wrote Lawrence Yun, chief economist at the National Association of Realtors, who published the chart on the right on Tuesday. “Even though single-family housing starts are projected to have risen for the fourth time in the past five years, the level is essentially at a deep recession level.”

Yun’s estimate is that 650,000 new single-family houses were built in 2014, but the normal should be 1 million.

The reason for the slowdown is that there aren’t enough new housing starts. For instance, while the cost of a rented apartment grew 31% between 2004 and 2014, home prices grew 8%. So the lack of home starts is increasing their premium price over existing homes.

Both new and existing home sales fell in November, data released last week showed.

Yun forecasts that single-family housing starts will rise to 820,000 in 2015, but this would still be below the historical average.

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