New Construction vs. Existing Homes: Which Is Cheaper and How Tariffs Tilt the Scale

by Austin Rowe

What the data says about prices right now

On average, new homes cost more than resales. A 2025 analysis found new homes were about 37.5% pricier than existing homes nationwide (median ~$538k new vs. ~$391k existing).
But the gap has shrunk in some periods. By late 2024, the median new-home price was only $9,100 above the existing-home median (nearly a tie) before widening again in many markets during 2025.
In mid-2025, the “premium” for new construction hit multi-year lows in some datasets, with one report pegging it at just 7.8%, the smallest since 2016, showing how volatile this spread can be when builders discount or buy down rates.

Takeaway: In a typical market, expect to pay more for new construction...though in windows where builders cut prices or offer incentives, the difference can narrow a lot.

Why new homes tend to cost more

Material + labor costs are baked into new-home pricing and have trended higher the last few years.
Up-to-date codes and features (energy efficiency, modern systems) add cost up front, even if they save money over time.
Builder financing incentives can hide price differences (e.g., rate buydowns), narrowing the visible gap without actually making the house cheaper to produce.

How tariffs move new-home prices

Tariffs act like a tax on imported building inputs (think softwood lumber, steel, aluminum). When these costs rise, builders pass much of it on to buyers—and new construction feels it first because every stick and screw is bought at today’s prices. (National Association of Home Builders)

Lumber (frames, trusses, sheathing)

In 2025, U.S. trade actions more than doubled the countervailing duty rate on Canadian softwood lumber (from ~6.7% to 14.63%), and—with anti-dumping—effective duties near ~35% became a real possibility discussed by industry groups. (National Association of Home Builders)
Earlier 2025 updates showed tariff rates around ~14.5%, with warnings they could move higher later in the year—injecting uncertainty that can price into bids.
Even when lumber futures dip, tariff uncertainty can keep delivered costs sticky for builders who must lock in supply and contingency.

Steel & aluminum (appliances, HVAC, fasteners, rebar, roofing)

June 2025 tariff changes effectively doubled prior steel/aluminum duties to ~50% in some cases, with immediate spikes in U.S. aluminum premiums; an added cost that flows into construction components.
Strategic analyses estimate tens of billions in added import costs for U.S. buyers, especially with fewer exclusions available than in 2018 reducing ways to avoid paying.

Bottom line on tariffs

Builders report five-figure cost impacts per home during tariff waves; one 2025 industry survey pegged the increase at ~$10,900 per home tied to recent tariff actions. (National Association of Home Builders)
Macro models suggest broad tariff packages lift overall prices (not just housing) squeezing affordability. (The Budget Lab at Yale)

So…which is cheaper when tariffs bite?

Existing homes usually win on sticker price, because they’re “yesterday’s materials” at yesterday’s costs. When tariffs raise today’s material prices, the gap tends to widen in favor of resales. (National Association of Home Builders)
But in markets with tight resale supply, builders may use rate buydowns and incentives to keep monthly payments competitive; temporarily narrowing the price gap even as build costs rise. That’s why we’ve seen periods where the spread shrank to single digits. (Realtor)

How to shop smart in a tariff-influenced market

Compare total monthly cost, not just price. A builder’s rate buydown can offset a higher base price; a resale might need a new roof or HVAC in 3 years. (Ask your agent/lender to model both scenarios.)
Ask builders what’s “locked.” Are lumber and metal packages already contracted? If not, you’re exposed to price-adjustment clauses tied to commodity/tariff moves.
Look for spec homes or nearly finished builds. More of the input costs are already fixed lower tariff risk, quicker move-in.
Price the “hidden metals.” Appliances, garage doors, roof components, and HVAC can swing with steel/aluminum costs negotiable upgrades or credits can hedge you. (MetalMiner)
Time your inspections on resales. An older home can be cheaper today but need capital repairs; get quotes now so you’re not surprised later.

Quick verdict

Most of the time, the cheaper option is the existing home. Recent national data still shows new construction carrying an average premium—sometimes big, sometimes small. (LendingTree)
Tariffs generally make new construction relatively more expensive by lifting lumber/metal input costs that builders pass through—widening the gap unless aggressive incentives close it at the payment level. (National Association of Home Builders)