New construction home prices fell to their lowest level in nearly five years in March, as builders cut rates and trimmed prices to keep sales moving in a market that still favors many older homes. The median new construction home sold for $387,400, down 6.2% from a year earlier.

That drop did not stop sales. New home sales ran at a seasonally adjusted annual rate of 682,000 in March, up 3.3% from a year earlier, and homes priced from $300,000 to $400,000 made up the largest share of the market. Sales below $300,000 accounted for 18% of the market, up from 14% in 2023.

The shift is showing up in the way builders are competing for buyers. In high-supply markets across the Southeast and Mountain West, they have been slashing prices and offering incentives, while also building smaller homes with simpler finishes to reach more budget-conscious buyers. The usual premium on new construction has narrowed enough that, in some places, it has disappeared entirely.

Odeta Kushi said the pull is strong enough that builders can bring buyers back into the market. “We know that there's pent-up demand for home buying, and I think that builders have the tools to be able to bring some of those buyers off the sidelines,” Kushi said.

For some buyers, the math is changing fast. Brandon Archie, a Realtor in Maple Grove, Minn., said several relocating clients recently chose new homes in the outer suburbs of Minneapolis-St. Paul. In one recent deal, a buyer in the area received $15,000 off the list price and another $5,000 for closing cost assistance or an interest rate buydown on a completed new home.

Archie said the appeal becomes even clearer once prices climb higher. “If you take a $500,000 existing home, more than likely in our market, there are going to be multiple offers, which is going to drive that price up,” he said. “Buyers end up having to do things like either putting more money down or waving a home inspection — just anything to be competitive in that market.”

He said the result is often a direct comparison between new and existing houses. “It's a pretty good mix of people choosing to go to new construction versus existing,” Archie said. “Once you get to a certain price point, kind of like that $500,000 price point, it almost becomes cheaper to buy new construction.”

The price gap is visible in several fast-growing markets. In the Austin, Texas, area, a new construction home averaged about 6% less than an older home in the first quarter of this year, according to Realtor.com. In Cape Coral, Fla., new construction sold for 13.5% less than older homes, while in Sarasota, Fla., the discount was 7.7%.

Older homes were still slowly appreciating even as new home prices fell, underscoring how uneven the housing market remains. Builders are adjusting to an affordability problem that has pushed many buyers to the sidelines, and the newest homes are increasingly being priced to compete rather than to command a premium. For now, the pressure is most obvious in places with a lot of supply, and buyers who can move quickly are finding room to negotiate.