The profit margin is higher on a new house and it also sells faster. In New York City (Bronx, Queens, Brooklyn), cost to build a new house is approximately $90 a square foot. A 2000 Sq Ft house cost (Raw Materials and labor only) to build is therefore $180,000. After considering cost of land and other related fees a decent builder total cost should not exceed $250,000. These homes at $400,000 can sell in a week.
It's just math.