Buying a brand-new home may seem like it starts with a floorplan and foundation. But long before the first wall goes up, the price tag is already climbing.
Builders are covering costs for:
- purchasing the site for construction
- securing permits and zoning approvals
- connecting water, sewer, electricity and other utilities
- meeting building codes and regulatory requirements
- engineering, design and environmental reviews
- carrying the property and financing costs while waiting to build
Those upfront costs can add hundreds of thousands of dollars before those quartz countertops or upgraded flooring ever go in. And those costs are growing.
A new study from the National Association of Home Builders finds that government regulations at the federal, state and local levels add an average of $131,734 to the cost of a new single-family home—equal to about 26% of the average new-home sales price.
Of that total:
- $84,939 comes from regulatory costs incurred during the construction phase, including building codes and permit requirements.
- $46,795 comes from regulations tied to land development, such as zoning, approvals and site preparation.
The cost impact has grown significantly. In 2021, regulator costs accounted for about $93,870 per home. By 2026, that figure has climbed more than 40% to $131,734.
“Excessive regulation is deepening the nation’s housing affordability crisis and making it harder for builders to deliver the affordable, attainable housing that our nation sorely needs,” Bill Owens, NAHB’s chairman, said about the study’s findings.
But those upfront costs are only part of that final construction cost. Selma Hepp, chief economist at Cotality, says today’s new homes often come with higher construction standards—like energy efficiency, technology and weather-proofing—that only add to that final price tag.
Christina Rordam, AHWD, a real estate professional with Florida Realty Investments in Orlando, says buyers also can dramatically increase the final cost of a home once they enter the design center to pick flooring, countertops, cabinets and more. She recalls one builder capping upgrade spending after a buyer selected more than $100,000 in upgrades. “The sky’s the limit,” she says, noting kitchens, flooring and structural options can quickly push a home’s final price far above its advertised base price.
The New-Home Price Paradox
Despite rising construction costs and expectations, however, new homes are not always carrying the premium buyers might expect. In fact, new homes have recently been selling for about the same—or even less—than existing homes.
Historically, buyers have paid more for a brand-new home. But that began shifting in 2024 as builders adapted to the growing concerns over housing affordability.
According to an NAHB analysis of U.S. Census Breau and National Association of REALTORS® data, the median price of a new single-family home in the first quarter of 2026 was $403,200, slightly below the median existing-home price of $404,600. That marked the fourth consecutive quarter in which existing home prices actually exceeded new-home prices.
Also, over the long run, new homes may represent savings. A new study from Realtor.com® found that buyers of newly built homes save an average of about $25,000 over the first 10 years of ownership compared to buyers of 20-year-old homes, due to lower energy costs and fewer major repairs.
Still, builders are trying to lower construction costs and address buyer affordability concerns in several ways, including:
- building smaller homes
- moving toward smaller lots
- offering incentives such as mortgage-rate buydowns and closing cost assistance
- adjusting prices more strategically
More than one-third of builders reported cutting prices in June, with an average price reduction of 6%. Also, 62% of builders reported using sales incentives, such as mortgage rate buydowns or closing cost assistance, according to NAHB and Wells Fargo’s builder sentiment index.
“The advantage that home builders have over sellers of existing homes is that they’ve been able to provide mortgage rate buydowns and other incentives that make it a little more affordable for potential home buyers,” Hepp says. She cites Cotality’s research, which shows that mortgage rate buydowns have gone from averaging less than 10% of sales among newly built homes to now being 70% to 80% share of sales.
Builders also are adjusting how they build to control costs.
“They’re trying to simplify the process in many ways,” Hepp says. “They’re putting in fixtures and finishes that are much more affordable. They’re using simpler floor plans—where builders come up with a book of floor plans and just offer those. All of these things are aimed at helping to lower the costs of new construction.”
