For consumers buying a home in the U.S. housing market, there’s been a big shift recently: the difference in price between newly built homes and older homes is getting smaller. In the past, buyers often paid more for a brand-new home.

Now, that extra cost is starting to disappear, and buying a new home is looking like a better deal, especially because fixing up old homes is getting more expensive.

The Rising Cost of Older Homes

After the financial crisis in 2007-2010, construction slowed down a lot, and the average age of U.S. homes grew.

Before the crisis, the average home was about 32 years old. Now, it’s 41 years old. Homes that are more than 40 years old often need lots of repairs, and those repairs can be very expensive. Homes built before 1970 are particularly expensive to maintain.

A report from the Federal Reserve Bank of Philadelphia says that homeowners of houses built between 1970 and 1999 spend 26% more on maintenance than people who own homes built after the year 2000.

This means that buying an older home means you might have to spend a lot of money on repairs like fixing old electrical wiring or updating the roof to protect against extreme weather like hail or heavy rain.

High interest rates are making it even harder for homeowners to fix up their houses because loans for repairs are more expensive. As a result, many people are putting off needed renovations, and the problem with aging homes continues to grow.

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Why New Homes Are Getting More Attractive

While new homes have always cost more upfront, that price gap is shrinking. Normally, new homes cost about 16% more than older homes, but in 2024, that difference is down to just 3%. This is the smallest it’s been in decades, partly because repairs on older homes are so expensive.

To keep new homes affordable, builders are making them smaller and simpler. For example, they are using less expensive materials like laminate countertops instead of marble and building homes with less space.

Homebuilders are also more realistic about pricing. They know buyers are looking for affordable options, so they price new homes carefully compared to owners of older homes, who often want to sell for top dollar.

Why New Homes and Old Homes Are Costing the Same

One reason for the smaller price gap between new and old homes is the low supply of existing homes for sale. Many people don’t want to sell their homes because they locked in low mortgage rates during the pandemic. This has created a shortage of available homes for sale. At the same time, homebuilders are continuing to build new homes to meet demand, even though construction has slowed down in other areas.

Builders are also motivated to sell homes quickly, especially as the year ends. They don’t want to keep homes on the market too long, so they offer discounts to move inventory. This is making new homes even more appealing, especially compared to older homes that need costly repairs.

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The Old Market Trick: Not Working Anymore

In the past, homes would lose value as they aged unless they were renovated. This process, called “downward filtering,” helped lower-income buyers find affordable homes.

However, this trend is changing. With interest rates high and housing supplies low, home prices are staying high, even for older homes that need a lot of work.

Today, buyers are stuck choosing between buying an old home that’s expensive and in need of repairs or a smaller, simpler new home that may cost less in repairs, even if it’s not as fancy.

The Bottom Line

Although it might be exciting to look for an older home to fix up, buying a new home has become a smarter financial choice for many buyers today. The difference in price between new and old homes is shrinking, and the cost of fixing up older homes is rising.

For people willing to give up some of the charm of older properties, buying a new home could offer the best value in today’s market.