By coinnews 
00:00 Speaker A
The median list price for new builds fell again during the first quarter, according to a new report from realtor.com. Here to discuss, we’ve got Joel Berner, who is the chief economist at realtor.com. Joel, great to have you here with us. Let’s focus first on prices for new homes. What contributed to the decline in new median prices this quarter?
00:28 Joel Berner
Well, the biggest thing, Brad, is that builders are building smaller. Smaller and more affordable homes in a lot of the US metros. In 26 out of the 100 largest metros across the country, the median price and the median square footage of newly built homes fell on a year-over-year basis. So while a lot of home buyers are looking around for a home that meets their needs and seeing that the existing home market just doesn’t have anything in their price range, builders are delivering new inventory that fits that price consideration really well.
01:08 Speaker A
And so in the first quarter, existing home prices actually increased on a year-over-year basis, though they’re still cheaper than new builds. What does that mean for buyers, and how is that influencing the decision-making process?
01:28 Joel Berner
I think buyers are going to see that even though there are a lot more homes on the market right now, especially in the existing home space, with people starting to list homes that have been reluctant to in recent years, the buyers are still going to see price challenges on the market. The existing homes continue to increase in value, which is a great thing for homeowners, but difficult for first-time home buyers especially. So what we’re seeing instead is that builders are offering the choices for prospective first-time home buyers that meet their budgets better than the existing home market does.
02:10 Speaker A
Is there a material difference for mortgage rates between new home buyers versus those who purchase an existing home?
02:21 Joel Berner
There is, actually. Not only do new home buyers save on the costs of home ownership because there’s less maintenance to do on a new home, but we see that they pay about half a percentage point lower mortgage rate than existing home buyers. It’s about 6.6 to 6.1 in 2024. Um, and that’s really interesting because what a lot of home builders are doing is offering mortgage rate buy-downs as an incentive to close the deal. So builders or buyers of new homes can save on their financing as well as cost of home ownership by getting locking in these lower mortgage rates.
03:12 Speaker A
So, tell us more about how tariffs could potentially impact the price and and just the psychology around some of the new home builds.
03:23 Joel Berner
Yeah, I think you’re exactly right, Brad. There’s two pieces to this. There’s the direct effects on new builds. There’s a 14% lumber on Canadian or 14% tariff on Canadian lumber right now that’s set to go up to 34% this fall. And that will simply add to the cost of a new home. That will bring housing prices up pretty directly and not a whole lot of question as to the in a direction of the impact there. But where tariffs are a little more confusing and more interesting, I think, is in consumer sentiment. Uh, we’ve been talking a lot about it for months now. Uh, as consumers are looking at the stock market, uh, which has looked good in the last week or so, as trade wars have, uh, kind of been walked down a little bit, but continues to be a little bit rocky. And, uh, as well as considering their own financial situation and their own employment situation, which tariffs were going to jeopardize because, you know, the only thing that really pins up the housing market is the labor market. So if people are afraid of losing their jobs, it’s going to impact the housing market. It’s going to bring down housing values and going to slow home sales even more than they already have been.