Buyers pay a hefty new home premium in Atlanta

It’s no secret that home prices in Atlanta have been rising. It’s also pretty well-known that new homes tend to fetch a premium over resales — they pretty much always have.

But that gap has surged in the past few years for the median sales prices of new homes versus resale. In 2017 the price difference for a new home vs. a resale home grew to a pretty impressive $101,200 or 54 percent more than the purchase price of a resale home.

That is, “a huge gap, no doubt about it,” said Eugene James, regional director in Atlanta for Metrostudy, the housing market data company that did the calculations.

“Most people have historically been willing to pay some kind of premium for a new home,” said Eugene James, regional director for Metrostudy. “But the premium was usually around 20 or 25 percent.”

The gap did slip to that level back in 2007, when the Atlanta housing bubble was bursting and the market was saturated with thousands of new homes that developers were struggling to sell. During the next few years, as the economy slowly emerged from recession, the market soaked up the vacancies, the supply of new homes shrank and once again, they began to draw a premium.

A median new home sold for $234,500 in 2010. That was $56,600 more than the median price of a resale, according to Metrostudy.

The next year, the gap between new home and resale shot up to $104,900, or 45.8 percent than resale.

The gap represents more than just buyer preferences for new, unlived-in houses, James said. For one thing, new homes in Atlanta have for been getting bigger. Last year, the median home resale of a home was 1,916 square feet.

The new home in 2017 was 2,800 square feet.

Moreover, the technology of a newer home has made them better insulated and more energy efficient, which means that some of the premium will come back to the buyer in savings.

“Prices are going up everywhere. Interest rates are starting to go up too. So I think you’ll see some smaller houses being built in the Atlanta market – that is how builders will control the price point.”

But the economics of building smaller homes on smaller lots will likely push many builders – and buyers – farther away from the city, he said. “Watch how the Atlanta exurbs flourish this year.”

Metro Atlanta, average premium paid for new homes above the cost of a resale home

2005: 33.2 percent

2006: 37.4 percent

2007: 25.1 percent

2008: 23.8 percent

2009: 17.1 percent

2010: 31.8 percent

2011: 45.8 percent

2012: 70.5 percent

2013: 63.5 percent

2014: 57.7 percent

2015: 55.6 percent

2016: 58.3 percent

2017: 54.4 percent

Source: Metrostudy


AJC Business reporter Michael E. Kanell keeps you updated on the latest news about jobs, housing and consumer issues in metro Atlanta and beyond. You'll find more on, including these stories:

Never miss a minute of what's happening in local business news. Subscribe to