Generally speaking, new homes tend to be priced higher than existing homes. This is, again generally, true because new homes are expensive to build, they're new and shiny, and because oftentimes they're pre-sold, meaning the purchase price reflects some future value.

But interestingly enough, this relationship has just flipped in the US, for the first time in at least 25 years. Here's the chart via Charlie Bilello:

This is, of course, a national average, and every submarket and product type is naturally going to have its nuances. Still, this inversion is noteworthy for a handful of possible reasons.

One, it points to softness in the new-home market. And indeed, homebuilder sentiment is down right now.

Two, it may suggest that homebuilders are building smaller, more affordable homes, which would bring down the median price.

And three, it's an indication of the "lock-in effect" that is prevalent in the US (but that is far less of a factor in Canada, where mortgages typically renew every few years).

For homeowners who are locked in at generationally low mortgage rates, there is a huge disincentive to sell. It would mean losing buying power. So why bother, unless you really have to?

This reduces the supply of existing homes on the market.

Generally speaking, new homes tend to be priced higher than existing homes. This is, again generally, true because new homes are expensive to build, they're new and shiny, and because oftentimes they're pre-sold, meaning the purchase price reflects some future value.

But interestingly enough, this relationship has just flipped in the US, for the first time in at least 25 years. Here's the chart via Charlie Bilello:

This is, of course, a national average, and every submarket and product type is naturally going to have its nuances. Still, this inversion is noteworthy for a handful of possible reasons.

One, it points to softness in the new-home market. And indeed, homebuilder sentiment is down right now.

Two, it may suggest that homebuilders are building smaller, more affordable homes, which would bring down the median price.

And three, it's an indication of the "lock-in effect" that is prevalent in the US (but that is far less of a factor in Canada, where mortgages typically renew every few years).

For homeowners who are locked in at generationally low mortgage rates, there is a huge disincentive to sell. It would mean losing buying power. So why bother, unless you really have to?

This reduces the supply of existing homes on the market.