While new-build homes have long been pitched as turnkey investments with built-in appreciation potential, first-wave purchasers in today’s market may find themselves facing a far less lucrative reality than previous generations enjoyed.
Today’s new-build buyers face a stark departure from the guaranteed appreciation and robust returns that previous homeowner generations experienced.
The confluence of minimal price growth forecasts, aggressive builder incentives, and shifting market dynamics creates an environment where early buyers risk disappointingly modest returns.
National forecasts paint a sobering picture for appreciation expectations. Zillow projects just 1.2% home price growth for 2026, while Redfin’s conservative estimate hovers around 1%, and even Fannie Mae’s more optimistic Home Price Expectations Survey only reaches 2.8%. These projections fall well below historical norms and barely outpace inflation, meaning real returns could be negligible or even negative.
Perhaps more concerning is the heavy incentive environment currently characterizing new construction. Nearly two-thirds of builders are offering substantial concessions to attract buyers, including price cuts as steep as 5%, mortgage rate buydowns, upgraded appliances and countertops, and closing cost assistance. While these perks benefit today’s purchasers, they effectively reduce the baseline price from which future appreciation will be measured, and they signal that builders prioritize sales volume over maintaining price discipline.
The traditional premium commanding new builds has evaporated in many markets. Historically, new homes sold for 10-15% more than comparable resales, but that differential is vanishing, with new builds actually becoming cheaper than existing homes in some locations. This erosion fundamentally undermines the value proposition that once justified paying more upfront.
Additionally, builders are increasingly focusing on smaller homes to address affordability constraints. While this strategy expands the buyer pool, it limits absolute appreciation potential in dollar terms, as smaller square footage simply cannot generate the same equity growth as larger properties.
The modest demand projections, with first-time buyers re-emerging only gradually rather than flooding the market, combined with mortgage rates still hovering in the 6% range and increasing existing-home inventory, all point toward a tepid appreciation environment. Adding to these headwinds, new single-family home construction fell about 7% in 2025, reflecting builders’ diminished confidence in sustained demand. After three years of below-average transaction volume, the market remains constrained by cautious buyer behavior despite accumulated pent-up demand. Even with improved inventory levels expected to stabilize the market, the additional supply may further dampen pricing power for new-build sellers. First-wave purchasers banking on quick equity gains may need to recalibrate expectations considerably.
