Homebuyers continue to turn to new houses instead of existing homes as builders provide incentives that bring cost-conscious buyers back into the market.

The Census Bureau said Thursday that sales of new single-family homes increased by 4.1% from September to an annual rate of 738,000. This was above the 720,000 expected by forecasters surveyed by Dow Jones Newswires and The Wall Street Journal.

New home sales are trending above pre-pandemic levels, starkly contrasting with their existing home counterparts. Existing home sales slumped in September to the slowest pace since October 2010.

🍸 What Was the Difference Between 🐬New and Existing Home Sales In September?

High iꦅnterest rates and prices have kept some buyers out of the housing market over the past two years, but economists say new home sales have one cost advantage over existing home sales.

More than 60% of builders reported using sales incentives in September to cut the average home price by 5%, according to the National Association of Home Builders. This has brought many buyers back into the market who would not have been able to afford a new home otherwise, said Moody's Analytics Economist Matthew Walsh.

"The upward trend reflects better affordability conditions in the new home market, which is relatively replete with supply and where builders are able to offer a menu of price incentives for increasingly cost-conscious buyers," wrote a team of Wells Fargo economists led by Charlie Dougherty.