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