Old homes in the U.S. now cost just as much as new properties. Here's why.
Looking for a house? A newly built home might not cost you any more than buying an older one.
Historically, older houses have cost tens of thousands of dollars less than newly constructed properties. But existing homes now cost a median of $416,000, which as of May is the same price as for new homes, Axios reported, citing data from FactSet. A decade ago, a typical new home cost $60,000 more than an existing house.
The shrinking gap in the cost of old and new home stems from the sharp rise in prices for older homes during the pandemic, as well as the recent jump in mortgage rates. Fewer property owners are listing their homes this year because of the "lock-in effect," with homeowners hesitant to give up low mortgage rates that they secured during the pandemic, when rates were 3% or lower, Sami Sparber, a real estate reporter for Axios, told CBS News.
The upshot: With current rates near 7% and home prices still climbing higher, homeowners may not want to consider moving.
"A lot of people are telling us they want to move, but they don't want to get rid of this amazing [mortgage] rate they have," Sparber said.
As a result, they typically either stay in their current home or move and rent it out as a second property. Sparber added, "Looking back at the pandemic in the home buying frenzy, a lot of people took advantage of those really low rates."
With so many homeowners staying put, the supply of properties on the market has fallen sharply, pushing up the prices of older homes.
One often more affordable option for people who are eager to move: renting a condo or townhouse, said Sparber, who also urges homebuyers to consider newly built properties.
"The market for brand new homes is booming right now," Sparber said. "With fewer people wanting to give up their rates, fewer transactions are happening on the existing home side, leaving room for the market for new homes to grow."