If you’re looking for a newly built home in the city, there are typically fewer options than in the suburbs.
Suburban building dominates the current market for new homes, with only 10% of new-construction homes for sale in urban areas, compared with 30% of existing homes, according to the Realtor.com® quarterly New Construction Insights analysis.
The few new builds in urban areas tend to command a hefty premium compared to nearby existing homes—with that premium rising as high at 300% in Miami, the report found.
Nationally, urban new builds easily outprice all other kinds of existing homes. New urban builds command prices 78.4% higher than existing urban homes. The median listing price of urban new construction tops $738,000, compared to the median price of existing urban homes, which are $414,000.
Rural areas see a similar trend. The median price for new construction there is $459,000 compared to $299,000 for existing homes. Suburban and smaller-town new-construction and existing-home prices are closer to parity.
Those prices reflect the demand for homes in urban areas, as well as the difficulty in delivering new homes in them, Realtor.com found.
The premium for new construction is highest in Miami
New York City sees the largest share of new urban construction listings at 69.6%, edging out Miami-Fort Lauderdale at 69.5%. But Miami’s new urban construction premium—305.2%—far outpaces New York‘s 106.8%.
That’s because the median listing price for a new urban home in the Miami metro topped $2.57 million, compared to a $459,000 median listing for an existing urban home.
“The housing market remains caught in the tension between the underlying demand and constrained affordability,” Stuart Miller, CEO of homebuilder Lennar Corp., said in a March earnings call. Lennar is the largest homebuilder in the Miami area, according to data from the South Florida Business Journal.
“Supply is still critically short, and years of underproduction have created a structural deficit that will take years to close,” Miller said. “But we believe the conditions are building for an eventual recovery.”
Miami is at the head of a set of metros, a mix of expensive coastal metros and affordable inland ones, where the median listing for a new urban build is multiples of an existing one. The Florida metros of North Port-Bradenton and Tampa-St. Petersburg, as well as St. Louis, also see a 200% premium on new urban homes versus existing ones.
Rounding out the top five is San Francisco-Oakland, where 68.9% of new-construction listings are urban and at a premium of 30.1%. Los Angeles has an urban share of 68.8% and a new-construction premium of 42.4%. New Orleans has an urban share of 62.4% and a new-construction premium of 24.9%.
These areas buck the trend of housing construction concentrated in large new communities on the city’s outskirts. Instead, they feature many urban ZIP codes with little empty land around them, Realtor.com found.
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Building urban
The price escalation has put pressure on cities to build more urban housing. Over a dozen states are considering or have passed laws aimed at cutting regulations and allowing for smaller “starter” homes. Many of these laws curtail caps on lot sizes, setbacks, and other regulations that drive up prices and complicate new builds.
And Congress is working through its own comprehensive housing bill with dozens of provisions aimed at deregulation. But it’s now stalled between the two chambers over several major differences—notably, a prospective ban on institutional investors in the housing market, which builders fear constrains supply.
“Light-touch density” is coming to the fore because it helps constrain the rising costs of homes, said Arthur Gailes, a research fellow with the American Enterprise Institute’s Housing Policy Center. Denser infill, townhomes, and other types of structures ultimately come at a lower cost than new McMansions.
And infill building generates more tax revenue. New-construction homes pay 25% more in property taxes than existing stock, Gailes said on a Tuesday call.
So large, older, and built-out cities benefit the most from promoting infill densification, he said.
“On the other end of the spectrum, areas in the Sun Belt, Florida and Texas, have more opportunity via new residential subdivisions,” Gailes said. “Because they’re building on more on greenfield land, out from the city cores, and allowing more density in these areas.”
