Topline

Although this data represents just one month of sales, it highlights trends for California based on median results from the six cities analyzed.

Buyers paid an average of $1.14 million for new homes compared to $935,000 for existing ones, making new homes 22% more expensive.

Some of this price difference can be attributed to mortgage rate incentives from builders, which encourage buyers to pay more for new homes.

However, the main reason for the higher prices is that new homes are generally larger, averaging 2,020 square feet compared to 1,585 square feet for existing homes—a 27% increase in size.

This issue isn't exclusive to California.

Nationally, new homes have a median sales price of $418,000 compared to $365,000 for existing homes, which is a 15% increase.

Additionally, new homes typically offer 1,990 square feet compared to 1,710 square feet for existing ones—16% larger.

Details Examining the price differences between new and existing homes in California:

• San Jose: New homes have a median price of $2.87 million, while existing homes are $1.6 million—79% higher (the fourth-largest gap among the 46 metro areas). New homes average 2,360 square feet versus 1,600 for existing ones, making them 48% larger (fourth-largest gap).

• Sacramento: New homes cost a median of $745,920, compared to $575,000 for existing homes—30% higher (24th largest gap). New homes are 2,340 square feet, while existing ones are 1,670 square feet—40% larger (eighth-largest gap).

• San Diego: New homes are priced at a median of $1.14 million, compared to $900,000 for existing ones—27% higher (25th largest gap). New homes average 2,060 square feet versus 1,480 for existing homes—39% larger (10th largest gap).

• Los Angeles-Orange County: New homes have a median price of $1.15 million versus $970,000 for existing homes—19% higher (27th largest gap). New homes average 1,970 square feet compared to 1,520 for existing ones—30% larger (16th largest gap).

• Inland Empire: New homes are priced at a median of $610,805, while existing homes are $562,500—9% higher (32nd largest gap). New homes average 1,980 square feet versus 1,720 for existing ones—15% larger (30th largest gap).

• San Francisco: New homes cost a median of $1.27 million compared to $1.23 million for existing homes—4% higher (38th largest gap). New homes are 1,380 square feet, while existing ones are 1,570 square feet—12% smaller (46th largest gap).

Bottom Line This issue isn't solely due to greedy builders.

The pricing discrepancies are largely the result of various policy and market challenges that make it easier to develop high-end housing. Expensive new communities are often easier to sell through local regulatory processes and attract wealthier buyers, yielding higher profit margins.

Focusing on high-end housing can also be more appealing to investors and banks funding construction projects. There are plenty of affluent buyers ready to purchase these pricier new homes.

In contrast, the 10 U.S. metros with the smallest price gaps between new and existing homes showed minimal differences in price or size. Meanwhile, in the 10 metros with the largest gaps, new homes were typically 40% larger and 80% more expensive.

Addressing the significant "unaffordability" issue in homebuying is complex. Simply building more homes won't solve the problem. While new housing supply helps balance inventory, significant affordability improvements take time to trickle down from the high end to assist those struggling to find more modest homes.

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